When we bet we rarely ask ourselves the following two questions:
1. What is our expected payout ?
2. Do we face value bets or not ?
Let’s try to address these questions. In the below example I will be referring to European football and European odds format. Consider the following game.
In order to determine our expected payout per EUR 1 stake we need to simply multiply probability by odds. For example if we take DRAW for each EUR 1 stake payout will be:
PO = 3.2 x 29.9% = EUR 0.957.
It turns out that we are losing because we get EUR 0.957 for every EUR 1 staked.
Furthermore here comes the value assessment question. A payout of less than 1 means we are losing in the long term. A payout above 1 means we have a value bet. Because we are getting more than EUR 1 for each EUR 1 staked.
We can try to explain the same concept in a more intuitive way. Let’s assume MUFC and Arsenal were to play hypothetically 10 games. DRAW has 30% chance of happening. As a result this means that 3 out of these 10 games will be expected to finish DRAW. Therefore if we stake at these 10 games each time EUR 1, we will have a total stake of EUR 10. However we will get back only:
PO = 3 DRAWs x 3.2 x EUR 1 = EUR 9.6.
So we get EUR 9.6 for a total stake of EUR 10.
This is what unfortunately happens most of the times and punters seldom understand it. Statistically speaking we are on the losing side almost all the time. In a way it is true that if we get the DRAW correct, we will have a nice return on our stake one time. But if we systematically stake on such games with similar payout properties we will be losing in the long term. Because this DRAW is going to be less likely to repeat in time.
So what can we do? Odds are fixed and set by bookies. Consequently we can’t change them. However probabilities are something that no one knows for sure.
For instance imagine we knew that in the above example the true probability of DRAW was 40%. Therefore payout would become:
PO= 40% x 3.3 = 1.32.
This means that for each EUR 1 staked we will be getting back 1.32. In other words if 10 games were played, we would bet a total of EUR 10 but get in return:
PO = 40% x 10 x 3.3 x EUR 1 = EUR 13.2. Not bad.
Ultimately arise two other questions:
1. Why would bookies deviate from fair odds and set prices we see. Read here.
2. How to determine fair probabilities. One alternative way to do this is to use a goal rating system.