Menu
The first step in calculating the optimal bet size with the Kelly Criterion is to determine your edge in a given wager. Your edge is the difference between the odds offered by the sportsbook and your own assessment of the likelihood of the outcome occurring.
For example, let’s say you believe that a particular outcome has a 60% chance of occurring, but the sportsbook is offering odds that imply a probability of 50%. In this case, your edge would be 10%.
Once you have determined your edge, you can use the Kelly Criterion formula to calculate the optimal bet size.
The formula is:
Where:
To calculate the optimal bet size, you’ll need to plug in the values for each variable. Using the example above, let’s assume you have a $1,000 bankroll and the odds on the bet are 2.0 (even money).
Using the Kelly Criterion formula, you would calculate the optimal bet size as follows:
f = (0.10 x 2.0 – 0.90) / 2.0
f = 0.05 or 5% of your bankroll
While the Kelly Criterion formula provides a useful framework for calculating optimal bet sizes, it’s important to note that it does not take into account individual risk tolerance. If you are a conservative bettor, you may want to adjust your bet size downward, while if you are a more aggressive bettor, you may want to increase your bet size.
In addition, the Kelly Criterion assumes that you have accurate information about the probability of winning a given wager, which may not always be the case. Therefore, it’s important to use the Kelly Criterion in conjunction with other betting strategies and to always consider your own knowledge and expertise in making betting decisions.
Calculating optimal bet sizes with the Kelly Criterion is a powerful tool for sports bettors who want to manage their bankroll effectively and maximize their potential returns. By determining your edge in a given wager and using the Kelly Criterion formula to calculate the optimal bet size, you can avoid overbetting or underbetting and make more informed betting decisions.
Remember to adjust your bet size based on your own risk tolerance and to use the Kelly Criterion in conjunction with other betting strategies. With practice and experience, you can use the Kelly Criterion to become a more successful sports bettor.
To calculate the optimal bet size, you need to use the Kelly Criterion formula: f = (bp – q) / b. You’ll need to plug in the values for each variable, including the odds received on the bet, the probability of winning the bet, the probability of losing the bet, and your bankroll.