Must of you who end up at this blog are probably quite deep into the business and are well aware of the basic principles of betting. But for you who are not this post will give you a brief insight.
Let us take a real example from today’s soccer matches, West Ham vs Manchester United (Third round FA Cup). The odds pre kick off on Betfair were:
West Ham – 4.5
Draw – 3.75
Manchester United – 1.93
These odds can be converted to implied probabilities by taking 1/odds, in this case:
West Ham – 22.2%
Draw – 26.7%
Manchester United – 51,8%
If we add them up we get 100.7%. If we had a perfect fair market it would sum up to 100% (as one of the three options must incur). The 0.7% is what we call overround, it can be considered as the “unfairness” of the bet. That “unfairness” is what normal bookmakers make a living of (such as Svenska Spel), the bigger it is the better I have to be if I wanna make a long term profit. Playing at Svenska Spel is not an option for me for many reasons, the main reason is that their over-rounds (= their guaranteed profits) is in the range of 10-25% instead of 0.x%.
Anyway, in this example my own math calculated the probabilities and the corresponding odds to:
West Ham – 3.64
Draw – 3.73
Manchester United – 2.14
In this case my algorithm made a buy on West Ham, because the odds given on Betfair was about 4.5/3.64 = 1.24 <=> 24% value!
So the idea is that if I keep betting on overvalues the I will in the long run make a profit. The outcome of one single match is not relevant, it is the trend over many matches that makes the story.
In this special case Manchester United managed to make a goal in (90+1) minute of the match, which sent my bet from heaven to hell…. But that is the nature of randomness, something I probably will bring up many times on this blog.
Have a good one!