How to Calculate Expected Value in Betting

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Calculating expected value (EV) is a fundamental concept that every serious bettor must understand to succeed in the long run. It’s a statistical measure used to quantify the average amount one can expect to win or lose per bet if the same wager were repeated multiple times. In this guide, we will explore how to calculate expected value in betting, with a particular emphasis on sports bet calculations.

Understanding Expected Value

Expected value represents the average outcome of a particular event based on its probabilities. In the context of betting, it helps bettors determine whether a wager is worth placing. A positive EV (+EV) indicates a potentially profitable bet, while a negative EV (-EV) suggests a bet that is likely to lose money over time.

The Basics of Expected Value Calculation

To calculate the expected value of a bet, you need to know three key elements:

  1. Probability of Winning: The likelihood of your bet winning.
  2. Probability of Losing: The likelihood of your bet losing.
  3. Payouts: The amount you will win if your bet is successful.

The formula for expected value is:

EV=(Probability of Winning×Payout)−(Probability of Losing×Amount Bet)\text{EV} = (\text{Probability of Winning} \times \text{Payout}) – (\text{Probability of Losing} \times \text{Amount Bet})EV=(Probability of Winning×Payout)−(Probability of Losing×Amount Bet)

Let’s break this down with an example.

Example Calculation

Imagine you are placing a sports bet on a football match. The bookmaker offers odds of 3.00 for your team to win. You bet $10 on this outcome.

  • Probability of Winning: Let’s assume the probability of your team winning is 30% (0.30).
  • Probability of Losing: Therefore, the probability of your team losing is 70% (0.70).
  • Payout: The payout for a $10 bet at odds of 3.00 is $30.

Now, plug these values into the formula:

EV=(0.30×30)−(0.70×10)\text{EV} = (0.30 \times 30) – (0.70 \times 10)EV=(0.30×30)−(0.70×10) EV=(9)−(7)\text{EV} = (9) – (7)EV=(9)−(7) EV=2\text{EV} = 2EV=2

In this case, the expected value of your bet is +2. This means that for every $10 wagered on this bet, you can expect to win $2 on average in the long run.

Importance of Expected Value in Betting

Expected value is crucial for bettors because it helps them make informed decisions rather than relying on gut feelings or emotions. By consistently placing bets with a positive expected value, a bettor can improve their chances of profitability over time.

Factors Influencing Expected Value

Several factors can influence the expected value of a bet. Understanding these can help you make better betting decisions.

1. Odds and Payouts

The odds provided by bookmakers directly impact the potential payout and, consequently, the expected value. Higher odds typically result in a higher payout but might also indicate a lower probability of winning.

2. Probability Assessment

Accurately assessing the probability of an event is critical. Overestimating or underestimating probabilities can lead to incorrect expected value calculations and poor betting decisions.

3. Bet Size

The amount wagered affects the potential profit or loss. A larger bet size increases both the potential winnings and losses, impacting the expected value.

Calculating Expected Value for Different Types of Bets

The calculation of expected value can vary slightly depending on the type of bet. Here are a few examples:

Moneyline Bets

Moneyline bets are straightforward and involve betting on the outright winner of a match. The calculation method remains the same as described earlier.

Spread Bets

Spread bets involve betting on the margin of victory. For spread bets, consider the odds and probabilities provided for each possible outcome.

Over/Under Bets

Over/Under bets involve betting on whether the total points scored in a game will be over or under a specified number. Calculate the expected value by considering the probabilities and payouts for each outcome.

Practical Steps to Calculate Expected Value

To help you calculate the expected value of your bets, follow these practical steps:

  1. Determine the Odds: Find the odds for the bet you are considering.
  2. Estimate Probabilities: Assess the probability of each outcome based on research, statistics, and expert analysis.
  3. Calculate Payouts: Determine the potential payout for a successful bet.
  4. Apply the EV Formula: Use the expected value formula to calculate the EV.

Example Table of Expected Value Calculation

To further illustrate the concept, let’s consider a few more examples in a table format:

Bet TypeProbability of WinningOddsBet AmountPotential PayoutExpected Value

In this table:

  • The moneyline bet has an EV of $0, meaning it is a break-even bet.
  • The spread bet has a positive EV of $0.51, indicating a profitable bet.
  • The over/under bet has an EV of $0, another break-even scenario.
  • The parlay bet has a negative EV of -$2, suggesting a likely loss over time.

Common Mistakes in Expected Value Calculation

1. Ignoring Vig (Juice)

Bookmakers include a margin in their odds, known as the vig or juice. Ignoring this can lead to overestimated expected values. Always account for the bookmaker’s margin when calculating EV.

2. Biased Probability Assessment

Allowing personal bias or inadequate research to influence probability assessment can result in incorrect expected values. Ensure your probabilities are based on objective data and analysis.

3. Not Considering Long-Term Implications

Focusing solely on short-term results can be misleading. Expected value calculations are most effective when considered over many bets, emphasizing the importance of long-term strategy.

Tips for Accurate EV Calculation

  1. Research and Analyze Data: Use reliable sources and statistics to estimate probabilities accurately.
  2. Compare Odds Across Bookmakers: Different bookmakers offer varying odds, affecting the expected value.
  3. Monitor Market Movements: Odds can change based on market conditions, influencing the potential EV.
  4. Manage Bankroll Wisely: Only wager amounts you can afford to lose to minimize risk.
  5. Track Your Bets: Keep records of your bets and their outcomes to analyze performance and refine your strategy.

Understanding how to calculate expected value in betting is an essential skill for any bettor aiming to make informed and profitable decisions. By considering probabilities, odds, and potential payouts, bettors can identify wagers with positive expected values and improve their chances of success in the long run. Whether you’re placing a sports bet or exploring other betting markets, mastering the concept of expected value will enhance your betting strategy and help you make smarter, more informed bets.

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