When I asked sports bettors what was most important to them, they were given seven options to choose from. Over seventy percent of 500 total respondents chose things like winning percentage, bankroll management, return on investment and entertainment. Now, assuming someone went with entertainment because they bet for fun and have no expectation of turning a profit, there’s no need to knock them for it. Some people simply see sports betting as a form of thrill seeking, and as long as they play responsibly, there’s nothing wrong with that. However, anyone who chose win/loss ratio, money management or return on investment wants more out of their experience than just the thrill of having skin in the game. If that’s the case, a lot of the bettors surveyed were objectively wrong when picking what was most important to them. Value is all that matters. If you can find it, everything else will take care of itself. This includes entertainment because, after all, winning money is fun. Understanding the concept of value betting is what draws the line between square bettors and sharp bettors. Sharps bet numbers, squares bet teams.
Expected Value (EV) or Profit Expectation (PE)
Expected Value (EV) is simply the amount a bettor can expect to win or lose if they were to place a bet on the same odds many times over. It can be expressed positively (+EV) or negatively (-EV).
In games of chance like roulette where all the probability distributions are known, it’s easy to calculate the expected value, but the sportsbook is a domain of uncertainty and the true probability of an event is unknown. Luckily, sports betting is a game of relative skill and a bettor doesn’t have to predict the future, they just have to predict it better than others. In order to obtain value in any particular market, a bettor must estimate the odds better than the bookmaker, and before other bettors beat them to it.
Once a bettor has estimated what they believe to be the true probability of an event occurring they can calculate the expected value. This is done by multiplying the probability of winning by the amount they could win and subtracting the probability of losing multiplied by the amount they could lose to find the expected value of a bet.
(Probability of Winning) x (Potential Amount Won) –
(Probability of Losing) x (Potential Amount Lost)
= Expected Value (EV)
In sports betting, this is sometimes referred to as Profit Expectation and it’s the most important number for any sports bettor. Why? Well, because it informs us whether or not we should expect to make money or lose money over the long run. Let’s assume that a bettor has estimated the New York Rangers chances (43%) of beating the Los Angeles Kings (57%) are higher than that implied by the bookmakers odds which are listed at +150 (40%). The bettor then would like to place a $1.00 wager in the hopes of winning back their stake plus $1.50. If you’re wondering why this bettor would want to bet on a team that they think is going to lose fifty seven percent of the time? It’s because this bettor understands the principles of value betting. In the example below, the bettor would calculate the expected value or profit expectation of a $1.00 bet on the Rangers at +150 as follows:
(43% x $1.50) – (57% x $1.00) = 0.075
The 0.075 is equivalent to 7.5 cents for every dollar that you bet. Therefore, a bet on the Rangers in this situation has a positive profit expectation. This would be a value bet assuming the estimation is backed by a rigorously tested process, which isn’t always the case and that’s why I’ll offer this caveat: believing you have positive profit expectation is very different than actually having it, and it’s easy to be blinded by success. So, how can a bettor distinguish whether or not they have a theoretical advantage? They track their ability to beat the closing line.
Implied Expected Value or Closing Line Value (CLV)
Closing Line Value (CLV) is a measurement of the implied advantage or lack thereof that a bettor has presumably accumulated on a previously placed wager. Essentially, tracking closing line value is how a bettor determines whether or not they beat the market.
If a bettor secures a positive closing line value it means that the odds that a bettor received when they placed their wager are shorter than the odds listed when the market closes. This is important In efficient betting markets where the closing line has been proven to be a more accurate reflection of the true odds than the opening lines that preceded them. If you’re not familiar with the efficient market hypothesis, it’s an investment theory that states that market prices fully reflect all available information.
When you think about the concept of an efficient market in the context of sports betting. A bookmaker opens a market and subjects it to opinions (bets) and any inefficiency in the market should be — theoretically at least — eradicated by the time it comes to a close and the game begins. This is why value bettors in efficient betting markets like football and basketball — both college and professional — put so much stock into beating the closing line.
For example, if a value bettor identifies an edge on the Nashville Predators moneyline at -175 and by the time the market closes the Predators are listed as a -250 favourite, they’ve already won. Of course that doesn’t mean the value bettor will win money every time, closing line value doesn’t pay the bills if the bets aren’t graded as winners at the end of the game. If a bettor consistently identifies value and beats the market, though, after the vagaries of luck even out, the bettor who bets value and only value will win.
However, it should be noted that closing line value may not necessarily be a good measure of expected value in niche betting markets, more or less, because there isn’t as much focus on them and often times there’s a lack of information. A market is considered niche when betting limits are $1000 or lower although opinions may differ on that number.
Another thing to consider is how high the betting limits are for each bettor. Opening or overnight lines have lower limits so not everyone can justify betting on them. A professional bettor needs to get down much more money in order to hit their targets than most do. Therefore, a professional does not have the advantage of betting soft numbers at open. A bettor could secure closing line value considered to be in the ninety-ninth percentile while betting into liquid markets and that same number would be considered average if they had been betting into openers. In other words, context is important.
It’s important for bettors to track both their closing line value and the frequency in which they beat the closing line. Doing this will help inform bettors about their past betting record and whether or not they should expect to experience success in the future.
If you’re looking for your next value bet, check out today’s bets at Corsica Hockey.
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