Thoughts On Value

I spent an excellent weekend at the BTCC meeting held at my local circuit, Knockhill. In the quiet spells between races, my mind drifted towards thoughts of value in football matches. In particular, defining value in-play. When do the odds become value, if ever, if they weren't value pre-KO? I found myself thinking of Schrödinger's cat - the thought experiment in the field of quantum mechanics.

I don't claim to be an expert. Far from it, but essentially it involves a cat being placed inside a black box that contains a device that at any moment can kill the cat. At any given point in time, how do we know whether the cat is alive or dead? We don't - not until the box is opened. The theory suggests that it is the act of observation, i.e. looking inside the box, that determines the status of the cat. Also, the theory implies that, as I understand it, as long as the box is closed and no observation has taken place, the cat can be said to be alive and dead at the same time - which leads on to the multi universe hypothesis. But that's a discussion for another day.

How does that translate to value betting? Granted, it may be a rather loose analogy, but I think of it this way...

In the days before in-play markets were available to us, betting on a football match was very much like the black box above. Once the ref blew his whistle for the start of the game, the contents of the box, from the point of view of the bet, where unknown - and indeed irrelevant. The money was down and there was nothing the punter could do about it.

Sensible gamblers would try and find value prior to kick off. That value would be based on probability of what the end result would be after 90 minutes. What happened in-between was of no importance as far as the end result was concerned.

Now, introduce in-play betting and does that value bet change? If it was value before KO do those pre-KO odds still represent value once the in-play metaphorical box is opened and we can see it's contents? I don't see why not as it is based on what the end result is. The fact that we can now observe the contents of the box doesn't change that. That is true if we intend not to do anything about it. But what happens when the odds change in-play. At what point can we say that the original bet is no longer value and should we do anything about it?

Keep in mind the well accepted fact that always betting on value will be profitable in the long term, so should we do anything about it if what we observe in the box changes? An interesting conundrum.

The opposite view can also be taken. If we deem the pre-KO odds to not be of value, at what point do they become value in-play? In either case, value or not, should we intervene when the box opens?

Lets take an example of a team who is favoured by the market and the odds are deemed to be value pre-KO. If the other team scores, the odds of our team will rise. Now, in the case of the sealed box, given that the pre-KO odds were deemed of value, these new odds must be of value. But this is where the 'observation' influences our choice.

As those of you who have used the 'Lay the Draw' trading method will appreciate, if the dog scores first, the draw odd often decrease slightly as the market expects the favourite to equalise.

This clearly leads on to a strategy where one looks for pre-match value favs going a goal behind
and backing them once the market settles again. A simple plan that should, in the long term prove profitable, assuming the dog scores relatively early on in the match. Having said that, if the pre-match odds are deemed to be of value, then it shouldn't matter when the dog scores. The resulting odds on the once favourite will still be of value when considering the initial opening gambit from the point of view of a sealed box.

It is the act of observing the odds change in-play that influence our responses to what's inside the box. Sometimes it can be simpler just to keep the box shut, though, just like Schrödinger's cat, not knowing what's happening inside the box can lead to complicated theories that prove of no use to us, until we look inside. And therein lies the paradox.

1 comment:

PhilipH said...

Your final paragraph is the one I favour! Not that I would ever bet on any bi-ped in the first place; far too unreliable imo.
Cheers, Phil