In theory, when bookmakers offer a price on any given betting event, the odds should fall short of the actual probability of the outcome itself. It is this margin – known as the bookmakers’ edge – which allows the bookies to make a profit over the long run.
In practice, however, bookmakers are sometimes forced to abandon this logic when the general public begins to back certain outcomes disproportionately, leaving them exposed to the risk of large losses if they fail to adjust their prices.
This has been the case with a British public which, it seems, has gone gaga on the idea of Harry and Meghan’s first baby being a girl – accounting for an astonishing 72% of all bets laid on the outcome so far, according to odds aggregation site Oddschecker.
Value Bet Territory
For any event with two possible outcomes – such as is the case for the Royal baby, i.e. boy or girl – the readjustment of those odds may also imply that prices on one of the two outcomes enters into value bet territory. And this is exactly what has been happening with the betting market for an upcoming Royal baby boy.
Under normal circumstances, both boy and girl outcomes should be equivalently priced at odds of just under evens in order for the bookmakers to guarantee themselves profit. Bookmakers did exactly that by offering prices of 10/11 [implied probability: 52.4% ] for either sex when news of Meghan’s pregnancy first emerged.
However, with the British public piling in behind their preference for a girl, bookmakers have become exposed to the very real possibility of large losses. As a result, they have drastically adjusted their odds for the less popular boy option to a price which runs above evens – to help balance the books, and thus taking the boy bet into clear value-bet territory.
Coral are currently offering the best market at 13/10 [implied probability 43.5% – far below the 52.4% that bookmakers had initially offered]. However, it is unclear as of yet whether the wider betting public has been wooed by the value. Consequently, British bookmakers may yet be left wreathing if Meghan gives birth to a girl in late April / early May.