Wednesday, 19 October 2011

Einstein On Value

TFM had a comment and a question:
Hey Cassini, great blog, I've been enjoying reading it every day. Just wondering, what do you consider a value bet? i.e. what % of the price on Betfair are you willing to get involved at?

What I mean is when the price on Betfair is 4 and you calculate that the odds should be 4.1, obviously that is not enough value for you. At what point does it become value, 4.2, 4.3, 4.8 etc.?

Cheers, and keep inspiring thought!
The answer is that after taking into account commission, if the 'true' price is 4.0. then anything above 4.0 is arguably value. The problem, as we all know, is that we can't be sure on one individual event, that our true price of 4.0 is true, so it is necessary to build in a bit of a buffer, which for me is typically around the 10% mark. 4.0 is a bit of a long-shot for my liking, at least for a punt, but at 2.0 I will look for a price of 2.2 or above. The way I have my spreadsheet set up allows me to adjust the percentage so that I can see how other values work.


TFM said...

Hey thanks a million for the great answer, genuinely didn't expect an actual blog post on it!

jokerjoe said...

With your estimated true probability and the odds you can calculate the overlay and Kelly proportional bet size. Though most people would use a fixed fraction of the Kelly optimal bet.