How to calculate expected value
- What is expected value?
- Learn how to determine if you should make a bet or not
With value, or expected value of a bet, we may know how much we should expect to be earning from it. This makes it the most important thing in betting out there. Keep reading to find out how you can calculate value yourself and make it one of your best tools in betting.
How to calculate expected value
The mathematic formula that gives you the expected value of a bet is quite simple. Just multiply the probability of the win with the amount of the potential profits per bet and subtract the probability to lose after you have multiplied it with the amount that could be lost per bet.
(Probability of the win) x (Potential profits) – (Probability of the loss) x (Amount lost per bet)
To bring that to your betting you should fill the above formula with your odds after some calculations:
- Find out the odds of every outcome of a match.
- Calculate the winnings for every result by multiplying your bet with the odds of each outcome and then subtract the amount of bet.
- Divide 1 by the odds of each outcome to come up with the probabilities of them.
- Add the info you came up with on the formula.
For example, let’s say Chelsea is playing with Stoke for the Premier League and with the set of odds being at 1.20 – 7.00 – 14.00, a bet of 1000 Ksh on Stoke returns 14000 Ksh with the probability for it being at (1/14.00 = 0.071) 7.1%.
The chance for Stoke not winning the match is the sum of the probabilities of the draw and Chelsea’s win, which is: 0.833 + 0.143 = 0.976 or 97.6%. The amount of money being lost with these two outcomes is the bet which is 1000. So, the formula ends up like that:
(0.071 x 13000Ksh) - (0.976 x 1000Ksh) = -53 Ksh
The expected value for this bet is in minus, something that let’s you know that for each bet of 1000 Ksh you’re about to lose an average of 53 Ksh.
How can the expected value help you in betting?
Remember that a negative expected value doesn’t mean that you will surely lose money. The odds given in a sports event are not objective meaning they include the trader’s opinion. So, if your prediction is better than his, you’re about to make some profits.
After you predict the probabilities of a game and convert them into odds, you can see if they’re any different from the odds given by the bookmakers. If that’s the case, you can go on and find out a positive expected value in order to get the most out of your prediction.
As the margin differs from one bookmaker to another, the value of their odds changes for the same bet. So, make sure you pick the right bookmaker for you by thinking about its odds among other things that may interest you. You can find the best guide for this and lots of other bookmaker features in Legalbet.
