About Online Sports Betting and Value Bets

Let’s go over an example to find out how a simple value bet works out for a bookmaker and how bookmakers make money. Thereafter, we’ll tell you why bookmakers normally don’t have everything going their way at all times.

Let’s go over a betting market about ‘Which team will win the toss?’ in a cricket game. It’s fairly easy to assign odds in this market as there’s a 50% chance of Team A winning the toss, and 50% chance of Team B winning it. Bookmakers normally assign the following odds in such a market:

Team A odds – 1.91 or 10/11

Team B odds – 1.91 or 10/11

Now, if a bookmaker accepts a £ 1000 bet on Team A winning the toss, and another £ 1000 bet on Team B winning the toss, he’d be accepting £ 2000 in total. In the event that Team A wins the toss, the bookmaker will payout £ 1910 to the winning punter, implying that there will be a guaranteed profit margin of £ 90 for the bookmaker. So, who do you think is getting the maximum value in this scenario? Obviously, the bookmaker!

Now let’s go over the same scenario from a sports bettor’s perspective. You have placed a £ 1000 bet on the probability of Team A winning the toss. If Team A indeed goes on to win the toss, you’ll get £ 910 as profit (after parting with your share of £ 45 margin or commission for the bookmaker). On the other hand, if Team B wins the toss, you’ll end up losing £ 1000. So, what do you think are your expected returns in this scenario? Let’s work it out through some simple mathematics.

In order to find out the expected returns, you’ll need to multiply the winning probability with the amount you stand to win. Thereafter, you’ll have to do the same with your losing probability and the amount you stand to lose. Then, you’ll add them together:

0.5 multiplied with £ 910 equals £ 455

0.5 multiplied with £ -1000 equals £ -500

£ 455 plus (£ -500) equals £ -45

Hence, it’s pretty clear that every time you place such a bet, the overall expected result for you would be a £ 45 loss. Therefore, quite clearly it’s not you but the bookmaker who is receiving value.

In case two sports bettors bet £ 1000 on either cricketing side, both can expect a loss of £ 45, and no matter who wins or loses, bookmaker would bag a guaranteed £ 90 (as explained above).

However, you might say how come it’s a loss if one sports bettor actually books a £ 910 profit? Nothing denying the profit made by the sports bettor, however, if the same sports bettor continues handing £ 45 margin/commission to the bookmaker each time he places a bet, he’s guaranteed to end up on the losing side in the long run. The only winner eventually will be the bookmaker.

So, how is it possible to win realistically in this market? The answer is pretty simple – you cannot! This brings us to an extremely important point:

The bookmaker was well aware of his odds in the example detailed above, and hence priced up his odds perfectly.

It may seem to you that sports betting is all about bookmakers holding all the advantage and booking consistent profits from all events? Actually, that’s not true.

It was pretty easy to work out the winning odds of both sides in the example detailed above. The same is the case when you roll a die, spin a roulette table or turn a card. However, things can get pretty hazy when it comes to complicated events. Let’s take a football match to explain it better. How easy do you think it is for a bookmaker to correctly price up the odds of a particular football match? To tell you the truth, it’s impossible. All that a bookmaker can do is make a good guess, which he normally does. The bookmakers make best use of the information available to them and accordingly price up a market. Exactly same theory is applicable to all markets offered by bookmakers - that is they make best possible guesses about odds they should offer.

Now let’s go over our earlier statement once again:

It should come as a very good news to sports bettors that it’s impossible for bookmakers to perfectly price up sports events! And this is exactly where punters can win a good amount of money! If you’re someone who can predict an event’s outcome better compared to a bookmaker, there’s definitely money lying for you on the table.

We saw how bookmakers are guaranteed profit on simple betting markets, and how sports bettors may lose money in these markets in the long term. Then we discussed how it’s almost impossible for bookmakers to perfectly price up sports events, thus giving a certain edge to the sports bettors.