Understanding Expected Value in Sports Betting
Understanding expected value in sports betting, and how to evaluate the profitability of a bet is crucial. It is also one of the most important concepts that separates casual bettors from serious, informed ones is expected value (EV). Whether you’re wagering on football, basketball, or baseball, understanding EV helps you make smarter bets in the long run. In this article, we’ll explain what expected value is, how it applies to sports betting, and how to calculate it.
What is Expected Value?
Expected value (EV) is a statistical concept that measures the average outcome of a scenario over time. In sports betting, it refers to the amount a bettor can expect to win or lose on average, over the long run, per bet. However, It’s not a guarantee for any individual wager but rather a way to determine whether a bet is likely to be profitable if placed consistently over time.
Therefore a positive EV means the bettor is expected to profit from the wager, while a negative EV indicates the bettor is expected to lose money over time. The key is to consistently place bets that have a positive expected value.
How to Calculate Expected Value
To calculate expected value, you need two pieces of information:
1.Probability of each outcome occurring.
2. Payout for each outcome if it does occur.
The formula for expected value is:
EV = (P(W) \times A(W)) – (P(L) \times A(L))
Where:
• P(W) probability of winning the bet.
• A(W) amount you stand to win.
• P(L) probability of losing the bet.
• A(L) amount you stand to lose.
Let’s break this down with an example.
Example of Expected Value in Sports Betting
Imagine you’re betting on an NFL game where the New England Patriots are playing the Buffalo Bills. The sportsbook offers you odds of +200 for the Patriots to win, meaning for every $100 bet, you would win $200. You believe the Patriots have a 40% chance of winning the game.
• P(W) = 0.40 (40% chance of the Patriots winning)
• A(W) = $200 (the amount you would win)
• P(L) = 0.60 (60% chance of the Patriots losing)
• A(L) = $100 (the amount you would lose, your original stake)
Now, let’s plug these values into the formula:
EV = (0.40 \times 200) – (0.60 \times 100)
EV = 80 – 60 = 20
In this case, the expected value of this bet is +$20. This means that, in the long run, you can expect to win an average of $20 for every $100 you bet on the Patriots at these odds. Since the EV is positive, it suggests that this bet is profitable over time.
- Positive vs. Negative Expected Value
• Positive EV (+EV): A bet with positive expected value means that you stand to make a profit over time. If you consistently place bets with +EV, you’re more likely to make money in the long run, even though you may lose individual bets.
• Negative EV (-EV): A bet with negative expected value indicates that you’re more likely to lose money over time. For example, if the probability of an outcome is lower than what the odds suggest, this would result in a negative expected value.
How Sportsbooks Factor Into Expected Value
Sportsbooks factor in their own “cut” (or margin), which is why their odds are typically set to create a negative expected value for the bettor. For instance, if two equally matched teams are playing, you might think both should have a 50% chance of winning. However, sportsbooks rarely offer even odds of +100 on both teams. Instead, they might offer -110 on each side, meaning you have to bet $110 to win $100. This margin ensures that, in the long run, the sportsbook profits from the volume of bets.
To beat the sportsbook, bettors must find opportunities where the true probability of an event happening is greater than the implied probability reflected in the odds—this creates positive expected value.
Implied Probability and Expected Value
Odds are a reflection of implied probability, which is the sportsbook’s estimation of how likely an outcome is. For example, if a team is listed at +200, the implied probability is:
\text{Implied Probability} = \frac{1}{\text{Odds in decimal form}}
\text{Implied Probability} = \frac{1}{3.00} = 0.33 \, \text{or} \, 33\%
If you believe the true probability is higher than the implied probability (say, 40% instead of 33%), then you have found a +EV situation. The key for bettors is to evaluate events more accurately than the sportsbook, which is no small feat but is the basis of successful betting strategies.
The Importance of Expected Value in Long-Term Success
In the short term, anything can happen in sports betting. You might win a bet with negative expected value, or you might lose a bet with positive expected value. Therefore, over the long term, betting consistently on events with a positive expected value will yield profits, while betting with a negative expected value will lead to losses.
Serious bettors use expected value to help guide their decision-making process, understanding that the goal is not to win every single bet but to make profitable bets over time.
Conclusion
Understanding Expected value in Sports Betting is one of the most important concepts in order to win. It allows bettors to assess whether a particular bet is likely to be profitable in the long run. By calculating EV, you can take a more analytical approach to betting, avoid bets that are likely to drain your bankroll, and increase your chances of being a successful bettor over time.
Always remember, sports betting should be approached with discipline and careful analysis. While EV provides a mathematical advantage, risk is inherent, and it’s important to wager responsibly.
