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Basic Probability and the Concept of Value in Sports Betting

Explore the role of basic probability in sports betting and how it affects the concept of value in wagers. Essential insights for bettors.
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Sports betting has gained a lot of traction lately, with many individuals placing wagers on the outcome of sporting events. However, it is not just a game of luck — probability is an integral factor that helps bettors make well-informed decisions.

Basic probability is a fundamental concept in sports betting that represents the likelihood of an event occurring. Yet, it differs significantly from implied probability.

Understanding this difference can help bettors identify value in odds. But it is not enough for bettors to make an informed decision about their wagers. To further improve their chances of winning, they must also factor in the concept of expected value.

This article will discuss the basics of probability and how it relates to implied probability and expected value in sports betting.

What Is Probability?

Probability is the likelihood of an event occurring. It is typically expressed as a number between 0 and 1, where 0 represents an impossible event, and 1 represents a certain event. Alternatively, probability can be written down as a percentage.

For example, the probability of flipping a coin and landing on heads is 50%. This is because there is an equal chance of the coin landing on either heads or tails.

Similarly, the probability of rolling a die and landing on a 6 is 16.67%. There are a total of six possible outcomes when rolling a die (1, 2, 3, 4, 5, 6), and only one of those outcomes is a 6.

Now that we have a basic understanding of probability, let’s take a look at how it differs from implied probability.

What Is Implied Probability?

Implied probability is the probability of an event derived from the odds offered by the bookmaker. Again, it can be expressed as a number between 0 and 1 or as a percentage.

It is important to note that the implied probability of all possible outcomes in a given event must add up to 1.0 or 100%.

As mentioned before, probability plays a vital role in sports betting. Let us illustrate this with an example.

Suppose a team is given an odds of 2.00 to win a match. In that case, the bookmaker believes there is a 50% chance of that team winning. This is because odds represent the implied probability of an event occurring.

The formula to calculate the implied probability is:

Implied Probability = 1 / decimal odds

So, for a team with odds of 2.00, the implied probability is:

Implied Probability = 1 / 2.00 = 0.50 or 50%

What Is the Expected Value?

Expected value is a measure of the potential value of a bet. It is calculated by multiplying the probability of an outcome by the potential return, then subtracting the probability of losing multiplied by the stake.

This formula can be expressed as follows:

Expected Value = (Probability of Winning x Potential Return) – (Probability of Losing x Stake)

For example, if you bet £10 on a team with odds of 3.10 to win, the potential return is £31. If the implied probability of the team winning is 32.26%, the expected value of the bet is calculated as follows:

Expected Value = (0.3226 x £31) – (0.6774 x £10)

Expected Value = £10.0006 – 6.774

Expected Value = £3.2266

The expected value of the bet is positive, indicating that it is a favorable bet with a potential profit of £3.22.

Note: It is important to mention that EV does not apply to all betting markets. For example, in a teaser bet, there are multiple outcomes that win different amounts. In this case, the math is more complicated and is best left to the experts!

Expected Value Table

The table below shows the expected value of a £10 bet at different odds and probabilities.

As you can see, the higher the odds, the greater the potential payout, but the lower the probability of the event occurring. The expected value takes into account both the potential payout and the probability and can help bettors make informed decisions about whether or not to place a bet.

OddsProbabilityPotential PayoutExpected Value
1.5066.67%£15£10
2.0050.00%£20£10
2.5040.00%£25£10
3.0033.33%£30£10
3.5028.57%£35£10
Expected Value = Probability x Potential Payout

For 1.50 odds:

Expected Value = 0.6667 x $15 = $10

For 2.00 odds:

Expected Value = 0.5 x $20 = $10

For 2.50 odds:

Expected Value = 0.4 x $25 = $10

For 3.00 odds:

Expected Value = 0.3333 x $30 = $10

For 3.50 odds:

Expected Value = 0.2857 x $35 = $10

What is Value Betting?

While value betting is not a new concept in the world of betting, it is yet to be fully understood by many punters. This is true even though value betting is an effective strategy that could help a punter to earn a lot of money.

Essentially, value betting is a strategy sports bettors use to identify and capitalize on betting opportunities where the odds of an event occurring are greater than the odds offered by the bookmaker.

This strategy is used by bettors to maximize their profits and to give themselves the best chance of winning their wagers. It requires knowledge of the sport or event, the ability to identify value bets, and the discipline to act on them.

Let’s explore this concept more in-depth using horse betting as an example.

In this particular case, value betting refers to when a punter bets on a horse with very low odds of winning. In most cases, the punter will be betting on a horse with odds much lower than what the horse would have been given if it were running against more competitive horses in the field.

This is important to note because it is one of the most significant factors that separates value betting from an average bet. While an average wager could be considered to be a bet that is simply made on the best horse in a given race, value betting is based on the current market conditions.

The value bettor will analyze the market and determine which horse will be the best bet to win the particular race. They will then bet on that horse, which is the one that has been undervalued in the market. It is one of the main reasons that value betting is so effective.

One of the main advantages of value betting is that it is a profitable strategy. This is because the value bettor makes a bet based on hard-to-get knowledge.

It is important to note, however, that there are other advantages to value betting as well.

For example, through value betting, a punter will learn a great deal about market conditions, which can be very useful. It will allow them to continue making reasonable bets, resulting in even more profit.

Who Introduced Basic Probability and the Concept of Value?

The concepts of basic probability and value have been used in various fields for centuries, with many contributors.

In the context of sports betting, the application of these concepts has evolved over time, with various individuals and organizations contributing to their development and popularization. Some notable contributors include mathematicians like Pierre-Simon Laplace and John Venn, as well as statisticians like Ronald Fisher and Frank Ramsey.

In sports betting specifically, many organizations and experts have helped popularize and refine these concepts over time, including sportsbooks, bettors, and sports analysts.

Who Introduced the Term Implied Probability?

The concept of implied probability has been used in various fields, including finance and sports betting, and its origins are unclear. Still, it is commonly associated with the betting industry and bookmakers.

Bookmakers use odds to express the probability of an event occurring. These odds are derived from complex statistical models and algorithms that consider a range of factors, including team form, player injuries, and historical performance.

It is difficult to attribute the introduction of the term “implied probability” to a specific individual or organization, as it is a concept that has been used in the sports betting industry for many years. It is widely recognized as an important concept in sports betting and is used by bettors to identify value in odds and make informed betting decisions.

Summary

Sports betting is a game of probability — there’s no running from that. Consequently, understanding basic probability and the concept of expected value is crucial to making informed decisions and increasing your chances of winning.

Basic probability is a good foundation from which to start and make decisions based on the chance of an event occurring.

Expected value should also be factored into every sports betting decision before you place a bet. If your expected value for placing a wager on an event is positive, you will likely make a profitable decision. Otherwise, it means there is no real value in betting on that particular event.

Overall, there are many ways to calculate the expected value in sports betting. But at the end of the day, you must have a solid understanding of basic probability and its relation to implied probability and expected value to make well-informed decisions about your wagers.

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