Value Betting-The Concept
Understanding The Concept Of Value Betting
The concept of value betting is similar to understanding the offside rule in football… it takes a little bit of getting used to.
Without a doubt it is widely misunderstood in betting circles, but at the same time it is also one of the most important. Regardless of which system or selection method you use, value betting is one of the most important considerations of successful and profitable betting.
Initially, let’s put to bed what value betting is NOT:
- It is NOT taking on a short priced favourite “just to get some value”
- It is NOT backing any horse each-way when it reaches “an each-way price”.
One common viewpoint of value betting is to try to take longer odds earlier in the day on a horse that goes off at a shorter price. For example taking 5/1 earlier in the day on a 4/1 winner. The problem with this is that there was no way of recognising that this would be a winner before the race. There is no feasible means to determine the value of an event based upon a single outcome. Just accepting a bigger price doesn’t equate to a value bettor. It’s only when you look at the bottom line at the end of a period of “value betting” that you will see what value you have achieved.
But all is not lost. There is a way to look for value selections and I’ll try to explain it here.
Value Betting and The Bookmaker’s Profit Margin
Let’s put one thing straight from the start – a risk taker is exactly what a bookmaker is not.
When framing odds for a particular event, bookmakers are attempting to compose odds that they think will attract betting on both sides of the market, therefore balancing the bookmakers liability given the possible outcomes. But if the bookmaker’s liability is equal given any outcome, how does a bookmaker make a profit themselves? The answer is of course, the margin. So we have to look a little further than the face value of the bookmakers’ odds for value betting.
The way that the bookies do this is to build what is termed ‘an overound’ into the market. In brief the overound is created by the bookie moving the odds to create his margin on the bets he accepts.
For example, in a five horse race, a bookmaker may choose to price up each horse at odds of 4/1 (5.0). In such a scenario, were he to take an equal amount of money on each runner, he would break even, as each horse would have a 20% chance of winning. In that the five runners have combined implied “probabilities” of winning of 100%, we are dealing with a “round” book. If however, he were to price up each runner at 3/1 (4.0), the implied probability of each runner winning will change to 25% from 20%. If he were again to take an equal amount on each runner, he would receive five units and pay out four. The profitable extra unit amounts to 25% and 25% x 5 = 125%. His book would be 25% “over-round”.
In practise it isn’t as black and white as this because they it is unusual for them to be able to balance their books as perfectly as they’d like, but, in theory this is what they are attempting to do.
Value Betting and The False Favourite
Let’s start off by looking at a very interesting statistic. If you could eliminate the short priced favourite from the race, it could reduce the book by 50%. Why is this good? Because you have started the first step into value betting. Any bet you place in the race is a “value bet”, because should the favourite be a non-runner, there is a good chance that the odds on every other runner in the race would be halved.
What you have created is a situation where the bookies margin is in effect less than 100% and a possible value bet on every runner in the field. How have you achieved this? By identifying a “false favourite” that has little chance of winning the race. For example, an evens priced horse with no form at the race distance, no form at the course or even proving unruly before the off is a prime candidate as a “false favourite” and value betting.
The savvy punter has a big helping hand these days with the betting exchanges, specifically Betfair. Watching the race just before the off, the alarm bells should start ringing if a bookmaker is showing the favourite at evens whereas it is trading at 2.3 or more on Betfair. This is a sure sign that all is not right in the favourite’s camp. This is when you can start thinking about classifying the horse as a “false favourite” and looking for value bets.
Value Betting – What to do with False Favourites
OK let’s have a show of hands. How many of you immediately think “let’s lay a weak favourite”? Well, it’s not wrong, but there is a much better way of approaching it.
The smart move here would be to check the bookmakers odds against the Betfair odds for the 2nd, 3rd and 4th favourite in the race. If there’s little difference (for example if 2nd fav is 7/2 and 4.7 on Betfair), then the value proposition here would actually to be to back the 2nd favourite and perhaps even dutch it with the 3rd favourite too. Can you start to see the value betting approach?
If the odds were 7/2 and 6/1 for the 2nd and 3rd fav, dutching both would return £273 for a £100 stake, which is £73 more than taking your chance on an 1/1 favourite who is showing obvious signs of weakness.
Value Betting Applied to Every Day
Whilst there is some merit and often profit to be gained from the many systems for laying short priced favourites out there, they do miss this one big trick. If you can come to terms with this way of thinking then there is potential for a great deal more profit with value betting.
Following the system that identifies short priced favourites verbatim, regardless of the odds is ignoring the “value proposition” in the race. Moreover, in practise the odds of the favourite will tend to fluctuate from race to race meaning that you won’t always get the best odds for your bet. In addition, if your layed selection gets beat, you then have the exchange commission to pay.
This would be an undervalued bet. Alternatively, the option is to ignore the favourite, especially if you have good grounds to do so, and back the strongest alternative or alternatives. You would now have a value bet, plus, there would be no Betfair commission to pay.
As a rule of thumb and if there is one thing I would like you to take away with you from this article is long-term profitable betting involves backing over the true odds and laying under the true odds.