- The maths behind expected value (EV) – how to calculate it and why you need to know
- The difference between bookmaker odds and true odds
One of the keys to becoming a successful punter is to understand the maths behind what you’re trying to achieve, and probably the most basic principle to understand is EV: expected value.
That’s all successful betting is – taking advantage of the probabilities when they’re in your favour. Master that and you’re halfway there.
Many punters spend years (or decades) betting away without ever looking behind it. So let’s change that, starting with the basics!
In essence, expected value (EV) shows how much you can expect to win (or lose) if you were to place the same bet on identical events, over and over again.
Expected Value: how to calculate EV
We’ll use a Big Bash match as an example. Let say the head-to-head market has the Strikers at $1.82 and the Heat at $2.10. And we’ll assume we’re having $100 on the Strikers to win.
1. Convert your odds to percentages by dividing them into 1
Probability of winning: 1 / 1.82 = 54.94%
As this is a simple two-way market, the probability of losing is just the odds on the Heat: 1 / 2.10 = 47.62%.
You’ll notice that 54.94% + 47.62% equals 102.56%. This gives a theoretical bookmakers’ margin of 2.56%.
2. Calculate the potential winnings or loss on your bet
Very simple in this case: the collect would be $182, with winnings of $82.
If we were to lose, we’d forfeit the stake of $100.
3. Use these figures in the EV calculation
The EV calculation is as follows:
(Winning percentage x Amount won per bet) – (Losing percentage x Amount lost per bet)
For our Big Bash bet, this results in:
(0.5494 x $82) – (0.4762 x $100) =
$45.05 – $47.62 =
The EV is negative $2.57.
This means that if you were to make the same bet on the Strikers in an identical match over and over again, you’d expect to lose an average of $2.57 for each bet of $100.
This, of, course reflects a head-to-head market where a bookmaker is deducting their own percentage, or profit.
Expected Value: so what?
The EV gives you a reliable view of whether your bet represents value or not.
If you have a negative EV, it doesn’t necessarily doesn’t mean you’re going to lose money. Betting odds are subjective, and are just a reflection of the bookmaker’s view on probability. If you can outsmart the bookmaker and figure out where they’ve got it wrong, you can make money is the long run.
If you calculate your own probability that differs from probability represented in the odds, you can see where to find a positive EV.
In our example above, the bookies’ odds say that the Strikers have a 54.94% chance of winning.
If your own calculations actually give them a 65% chance of winning, the EV increases to positive $5.68.
Give it a go…