# What’s This Value Thing All About?

You’ve heard this word “value” battered about for months, possibly years, but yet it’s still some kind of elusive entity. Something that you can’t quite wrap your fingers around.

What does it mean? Why should you check for it? How long does it take to determine if you’ve got it?

Those are the questions that are running through your head whenever you see the word “value” written down.

If you’re asking yourself those questions then you’re not alone. In fact I would guess that 99% of punters are asking themselves the same questions.

There are even punters out there who swear that “value” is something which has been made up by marketers to sell betting systems and tips. That it’s actually non-existent and doesn’t work.

So let me start by saying that…

A) It’s not made up by marketers

B) It does exist and definitely works. In fact without it you can’t make a profit betting!

Now that we’ve got that out the way it’s time to answers some of those questions that you’ve got burning inside you.

Before we begin you should be aware that it may take a few readings of this blog post to understand the full concept of “value”. All I ask is that you believe me when I say that without it you can’t make a profit and when you understand it you’ll be a much better bettor.

Okay, let’s begin with the question… What does it mean?

Wherever you bet be it bookmaker, betting exchange or totepool you are given odds. And that’s where the understanding of “value” begins.

Odds are simply another way of expressing the probability of an event happening. To find this probability you do the calculation:

*(1 divided by (decimal odds – 1)) multiplied by 100*

If we are betting on a selection with decimal odds of 5.00 then we’d have:

*(1 divided by (5.00 – 1)) multiplied by 100 = 25%*

That means the odds are telling us that this selection has a 25% chance of winning.

If you do this for every outcome in an event then and add them together you should get 100%. After all, there’s a 100% chance that one of the outcomes will be the winning one!

But bookmakers need to make a profit and so they adjust the odds. If the chance of our selection is winning is 25% then they may offer us odds which indicate it’s got a 30% chance of winning.

That would be odds of…

*(1 divided by (4.33 – 1)) multiplied by 100 = 30%*

Instead of odds of 5.00 they’re offering us odds of 3.33 which means they pay us out less if it wins.

For the moment let’s assume that there are four selections in our race all with a 25% chance of winning.

*25% x 4 = 100%*

There’s a 100% chance that one of these runners is going to win but, the bookmakers have artificially adjusted the odds so they indicate there’s a 30% chance for each horse of winning.

That means…

*30% x 4 = 120%*

There’s a 120% chance that one of these runners is going to win. But that’s impossible!

What the bookmaker has done is reduced the odds to a level where they will take 20% more than they will pay out when one of the horses wins. This is called an over-round.

And that’s how they make their money!

But “value” is where we realise the bookmaker has got it completely wrong, and it does happen.

If the bookmaker is telling us that the horse has a 30% chance of winning then they probably really think it’s only got a 25% chance of winning. But what if…

…they were wrong.

What if we knew that the horse had a 35% chance of winning?

That would mean that…

*(1 divided by (2.86 – 1)) multiplied by 100 = 35%*

The odds should actually be 2.86 and the bookmaker is offering us 3.30. They’ve made a mistake and this is called value.

And you should always check for it because it’s the only way to make a profit. Let me show you why.

Going back to our original example where each of the four horses has a 25% chance of winning. Imagine that you’ve run this race 100 times and bet the same horse each time (I know it won’t be exactly the same each time but this is an example) then you will have won 25 times and the bookmaker has paid out at their reduced odds of 3.33 (remember this would mean the horse should have a 30% chance of winning).

You have:

Bet 100 units

Won 25 times

Lost 75 times

Taken odds of 3.33 on each bet

Your return would be:

*25 x 3.33 = 83.25*

But you’ve bet 100 units so you need to take this out resulting in…

*83.25 – 100 = -16.75*

A loss!

That’s because there was no value. Your horse only had a 25% chance of winning, but you took odds that indicated it had a 30% chance of winning.

But if we do the same thing when the bookmaker has it wrong and they’re offering the odds indicating it has a 30% chance of winning when we know that it has a 35% chance then things are very different.

Bet 100 units

Won 35 times

Lost 65 times

Taken odds of 3.33 on each bet

Now your return would be:

*35 x 3.33 = 116.55*

After taking away the 100 units bet you end up with:

*116.55 – 100 = 16.55*

This time we’re in a profit because there was value in the odds. And that’s the reason we have to find value in order to be able to win.

Now the hardest part is knowing when you’ve found value. There are two primary ways in which this is done:

1) You create an odds line and compare it to the bookmakers odds

2) The value is inherent in the system you’ve built because it makes a profit

Most people will fall into the second category and so I’m going to focus on that.

If you have a betting system that’s making a profit but you haven’t gone looking for value then at first glance it would seem that you don’t need value to make a profit.

But, if you look a bit deeper you will find that value is there.

The only difference is that your system is finding selections that the bookmakers are getting the odds wrong for regularly enough for it to make a profit.

And here is how you can check it for yourself…

Take the results from your system and calculate the strike rate. How often do you selections win.

Then calculate the average odds for all of your selections.

You now have two figures:

A) The strike rate of your selections

B) The average odds of your selections

Next you need to take the average odds and convert it into a probability using the formula you’ve already seen:

*(1 divided by (decimal odds – 1)) multiplied by 100*

If your selection has made a profit then your winning strike rate will always be higher than the strike rate that the odds you’ve taken would suggest you should be getting. And, that means only one thing…

You’ve found value!

But like everything in betting, you should be looking for value in the long-term. Whether you create your own odds lines or have it inherently in your betting systems, it doesn’t matter if the horse you bet on today wins or loses. What really matters is that the odds you are taking are higher than they should be.

So, in summary, understanding what “value” is will make you a far better punter and change the way you consider your selections. In order to make a profit you must be getting “value” which is why so many pros recommend that you go through the bookies to get the best odds on offer, and if your betting systems are profitable then you’re finding value.

You say – “What if we knew that the horse had a 35% chance of winning?” How do we know that? Making your own “odds-line” is subjective, as is the manner in which the bookmaker odds maker creates the odds on offer. Who is correct? The information on which the odds are created is (mostly) within the public domain and it is individual interpretation of that information that will determine their individual assessment of the percentage chance of winning. I would suggest that most punters have neither the time nor inclination to study the form in-depth, hence the betting “systems”, and I personally would rather have a higher strike of winners per se than a method that tries to beat the book in terms of simple “value”. I am not interested in the “having a good run for my money” or “at least I got value” scenarios.

Great comment Michael 🙂

It’s difficult because as you say it is subjective pre-race which means you have to look at it over a period of time. You need to be winning more often than the odds you are getting would suggest over a period of time.

Looking for a higher strike rate unfortunately won’t necessarily make you a profit long-term unless you are also getting the value in your odds. The simplest example is that if you bet on all runners at evens or less you are going to win 56% of your bets and you will lose around -4% to SP.

The reason is because the average odds are 1.70 which would indicate these selections need to win nearly 59% of the time to break even. The difference between the actual strike rate and the one the odds being taken say it should be is the amount being lost. However, if you had gone hunting for the best odds available and got average odds of 1.90 then that would indicate the selections should win about 53% of the time. However you are winning 56% of the time and so you will be making around a 3% return on investment in the long-term.

Your explanation of “value” in betting, (in my opinion) is flawed! Over many years I have read a lot about “value” in betting. I sincerely believe that “value” betting is a myth.

To press the case for value we usually get the example of tossing a coin and getting the odds of 5/4 for heads instead of evens. The argument goes on to say that the true probability of getting heads is evens (50:50) so if you can get 5/4 on heads you have value. But this is only true if you bet on many tosses of the same coin. Probability sates that over 100 tosses, 50 should come up heads so with odds greater than evens you should make a profit if you takes odds of 5/4. But what if you only have one chance? What if you only get one bet on the toss of that coin? And this is where most discussions on value in betting fall down.

With horse racing you are betting on a “one-off” event. You are not betting on a repeated event like the toss of a coin or red or black on a roulette wheel. So any arguments based on multiple runs of the same race are just not applicable to the discussion.

Some so called experts even argue that if a horses’ odds are 3/1 this means it’s going to win three races out of every four runs. This is just not true. They go on to say that if you can get odds for the same horse at 7/2 then you have value and you must win in the long run. Again this is so badly flawed! The next time the horse runs it could be any price. It’s not going to be 3/1 every time.

My argument is that every horse race is a “one-off” event so to use repeated events like the toss of a coin or red/black on a roulette table is nonsense because racing doesn’t have repeated events.

I have had many discussions with so-called betting experts over the “value” issue and in my opinion every article I have read has been mathematically flawed.

If tomorrow I can get 4/1 on a horse that should really be 3/1 that won’t guarantee me a profitable win. And because the race will be a “one-off” event I can’t use the repeated event argument to justify my betting on it. Yes it might win. But then it might not. After all the horses in the race haven’t a clue whether their odds are greater than their probability of winning.

Now in closing, I do agree that we should always aim to get the best price for our selections – that seems obvious to me but to say it’s all about value, well that doesn’t make any logical or mathematical sense.

Hi Bernard, thank you for the very detailed comment. You’re not the first person on RA to have posted a similar view on “value”. Let me go through some of your points and see if I can change your viewpoint.

First of all you are right, a horse race is a one-off event. Since you seem to be good with maths I will use it to back up my argument for value.

There is only one true odds-line in a horse race. The winner has a 100% chance of winning and every other horse has a 0% chance of winning.

Working that out is of course impossible, so any odds line (whether bookie, betfair or your own) is about trying to be as close to getting the winner 100% of the time.

There is also no way that it is possible to look on this at an individual race level, it’s just not possible for punters or bookies.

If you look at Betfair then you can say that the odds line is pretty accurate in the long-term. Of course, there’s never going to be a race where the winners odds are 1.00 and every other horse has 1000 before the race goes off. But, if you take all horses with odds of 4.00 over a period of six months, then they’re going to win about 25% of the time.

So while it’s not right on every individual race, because the only way to be right is have 100% for the winner and 0% for the other runners, over a long period of time the horses being given odds of 4.00 are winning about the amount they’re expected to win.

As bettors we need to find the situations when the bookmaker or market isn’t achieving that long-term accuracy.

Let’s take one group of horses over a period of six months that we gave 3.50. Every horse has odds of 4.00 with the bookies but our odds line averaged out, again in the long-term, to 3.50. Of course the group doesn’t contain every horse the bookie gave odds of 4.00, only those that we thought should be 3.5.

We take this subset of horses and check how often they won. If they won 25% of the time or less then the bookmaker was right more often than we were and we will lose money. If they win more than 25% of the time then we were right more often than the bookmaker and we make money.

If we are right more often than the bookmaker over this six month period of time then we know that we are better at judging in these races the horses chance of being the 100% winner than the bookmaker.

So, in those races where we are a better judge than the bookmaker we know that if we give a horse odds of 3.50 and the bookmaker has it at 4.00 then we have found “value”. That doesn’t mean that our selection will win this race, or the next or in fact any in the next twenty races. What it means is that in the long-term we are a better judge of a horses chance of being that 100% winner and so we can make a profit.

Of course, this is a simplified example and different horses have different odds both on our own odds lines and with the bookie but the principle remains the same that if for a subset of horses over an extended period of time we get closer to the 100% chance of the winner winning and the 0% chance of all other horses winning than the bookie then we will make a profit.

Before finishing I think it’s important to point out that you don’t have to create odds lines to achieve this goal. Your system could find selections that you only bet if the odds are 4.00 but, in the long-term, win 30% of the time. This means your system is finding selections that are closer to the 100% winner and 0% losers than the bookmakers are doing and so you are making a profit. This is also finding the “value”.

I hope that clarifies what is meant by “value” and how it works mathematically and why it is the only way to make a profit.

Hi Michael,

I agree whole heartedly although trying to determine ‘value’ is very difficult unless you have the ability to draw up an odds line yourself which is comparable to the odds compilers. Just one thing though, surely the decimal odds within the brackets should be 4.33 for 10/3 or 30% and 3.86 for 23/8 (between 11/4 and 3/1) or 35%

Hi Nick, thanks for the comment. You’re right I had already subtracted the one from the decimal odds in my head when I was writing it. Thanks for spotting it, I’ve corrected it now.

Odds, value is everything. The best way to apply the overround is to choose races where you can discard some or even most of the field. Then dutching comes into play. I often back the first 4,5,6, or even more in the betting. Using my own opinion of what the race odds should be then if any of these wins then I am in profit. Add to this betting in running and you can easily end up covering every horse in the race. ( this works better on the longer races.)

Excellent approach Steve, thank you.

‘The information on which the odds are created is (mostly) within the public domain and it is individual interpretation of that information that will determine their individual assessment of the percentage chance of winning.’

Isn’t it this ‘human’ element that allows us to make a profit from betting on horses in the first place? If, having done my homework, I believe horse A will win, but horses B and C are likely dangers, if I back horse A at 3/1 (1 point each for the likely dangers and 1 point to account for the unexpected), I’ve found value, haven’t I?

Incidentally, I take your point entirely about assessing value retrospectively, from a mathematical point of view.

I would definitely agree that the human element can be the element that allows you to find value and make a profit. But it can also be done via statistical analysis as well. My personal approach to determining whether I’ve found value is based on whether then selections I’ve been making, overall win more than their odds suggest they should have.