17/12/2011 edition

Understanding Horse Racing Betting Markets and Odds

We couldn't help noticing the other week some assessed odds in a racing publication for the top five horses in a race. These prices immediately caught our attention.

So here are some random prices of our own. See if you can work out why these assessed odds for the top five runners in a nine horse field would immediately catch our attention:

$3.00
$3.90
$4.00
$4.40
$16.00

Worked out why? If not, here are the odds again with the percentage chances of winning for each one - just divide 100 by the dollar odds.

$3.00 - 33.33%
$3.90 - 25.64%
$4.00 - 25%
$4.40 - 22.73%
$16.00 - 6.25%

Total that up and you get 112.95%. Now these prices cannot bare any logical mathematical relationship to a horse's true winning chances. It is not possible for one of those five horses to win that one race approximately 1.13 times every time the race is run. That's what giving those runners a 112.95% chance of winning means. (That's also not including the winning chances of the other four runners.)

Put another way, to easily understand the maths, imagine if we assess the odds of heads and tails for the toss of a coin as both being $1.80. Now we all know they are even money ($2.00) chances.

Now further imagine you are offered $1.90 about heads and tails. You bet $10.00 on each. Every toss of the coin you get a winner and win $9.00, but lose your other bet of $10.00. So you are down a dollar.

But guess what. We can claim that you got a value winner every toss of the coin because we assessed heads and tails as both $1.80 chances!

In fact, that's what some racing services selling ratings have been doing for years. Some years ago we were shown the market of a commercial tipping service. It was regularly advertising big overlay winners - rated $3.00, wins at $10.00 etc. - sucking punters into parting with their hard earned money and subscribing. What they were doing was pricing their top four or five horses at 100% of the market or even higher - giving every other horse 0% chance of winning - and in fields of 16 or more horses.

Here is an example of ratings that are statistical nonsense in a 16 horse field:

Horse 1 - 2.50 (40%)
Horse 2 - 4.00 (25%)
Horse 3 - 5.00 (20%)
Horse 4 - 6.00 (16.67%)

Total market 101.67% PLUS no chance for any of the other 12 horses to win!!

Basically if any of the top four win a big overlay will be claimed!!

To have mathematically valid assessed odds the market must be priced at no more than 100% taking the entire field into account.

While on the theme of betting odds you can now easily work out what you are up against betting on the tote. Check the SuperTab and UniTab final tote odds for each race on their websites. All you need to do is take each price and divide it into 100 to get the percentage. For example, if the favourite is $4.00, that is 25%. If the next horse is $5.00, then that is 20%. Add these percentages up. You will probably get close to 120%.

Let us assume you got exactly 120%. To work out what the true odds of each runner was, based on the total money in the pool, all you need do is multiply the tote odds by 120 and divide the result by 100. So if the tote odds are $5.00, you end up with 600 which you divide by 100. The true odds you should be getting without the tote cut are $6.00. Now that really let's you know what you are up against. Based on the money wagered, instead of being paid $6.00, you are being paid just $5.00 for that winner.

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This edition of Punt to Win:
Understanding horse racing betting markets and betting odds
The Professional Punter's horse racing news
The Bunched Finish horse racing betting system
Horse racing form analysis and betting system tips
Horse Watch betting system - future winners
Free horse racing betting tips package membership!
Get those betting odds
Betting favourites in small fields: 10/12/2011 & 3/12//2011
Betting favourites in small fields: 26/11/2011 & 19/11/2011
Best odds for well bet winners - bookmaker or tote?
Betting top weights - horses carrying a weight handicap of 59kg.
Punt to Win 19/11/2011
Punt to Win index

2011 Melbourne Cup Day
Winners under $10.00
Best Bookmaker Win Odds
Best Tote Odds

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