Whether you're in finance, banking or the sports betting market, being able to calculate expected value on a trade or a bet is fundamental to your long term success.
In fact, one mathematician used expected value to win the lottery!
And despite its accuracy, most sports bettors are not familiar with this technique.
That's why today, I want to show you how to use expected value and why it's crucial you add it to your sports betting strategy!
Let's get started…
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What is expected value?
Expected Value (EV) is a method used to measure the relative values in a two-sided decision, like:
“Will a coin land on heads or tails?”
It does this by using a simple decision matrix that weighs up the upside and downside of the two options.
It’s best used by sports bettors to determine the amount they can expect to win or lose on a given bet.
With a positive EV indicating a profitable position and a negative EV a non-profitable position.
How to calculate Expected Value
The formula to calculate Expected Value is relatively simple.
[(Probability of Winning) X (Amount Won per Bet)] – [(Probability of Losing) X (Amount Lost per Bet)]
Firstly, you will need to find the decimal odds for each outcome (Win, Lose and Draw).
Then you’ll need to calculate the potential winnings for each outcome by multiplying your stake (amount you’ll bet) by the decimal odds, then subtract your stake.
Thirdly, you’ll divide one by the odds of one of those outcomes to calculate the implied probability of each outcome. Then substitute this information into the formula to get your Expected Value.
Liverpool (0.75) play Man Utd (3.6), with a draw at (3).
Our stake will be R100.
If we bet on Man Utd to win, our potential winnings will be R360, with the probability of that happening at:
(1 ÷ 4.6) x 100 = 21%
The probability of this outcome not occurring the sum of Liverpool and a draw.
(25% + 57.14%) = 82.14%.
The amount lost will be R100.
Therefore, if we input these values into our formula we’ll get:
(Probability of Winning) X (Amount Won per Bet) – (Probability of Losing) X (Amount Lost per Bet)
(21% x R360) – (82.14% x R100) = - 6.54
The Expected Value is negative for this bet, meaning that you will lose an average of R6.54 for every R100 staked.
Negative and Positive Expected Values
A positive Expected Value does not always mean the bet will come out a winner. The bet will still have to win, Expected Value just shows you whether or not the bet is a good value bet.
A negative Expected Value won’t mean you’ll lose every time.
Sometimes a wager on a strong favourite will turn out to have a negative Expected Value, however, a negative Expected Value means the bet doesn’t have value, not that the favourite will lose.
If you outsmart the bookies, money can be won. This is what sports betting is all about, outsmarting the bookmaker is the main goal and Expected Value is a great piece of information to help you do so.
Until next time,
The Winning Streak Team