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Betting Value: The Key to Getting the Most for Your Thoroughbred Wagering Dollar
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Updated: Mar-20-2009 Created: Oct-02-2008
By Tim Maas
Owner, Overlay Publications
There Is More to Winning than Picking Winners
Legendary football coach Vince Lombardi is credited with commenting, "Winning isn't everything. It's the only thing." For him, that statement was true. A win counted the same for his players, whether they won by one point or fifty. The crucial consideration for the coach was that they won games.
The same couldn't be said for those who bet on the outcome of those games. Their motto might have been, "Winning isn't everything or the only thing." They knew that, even if their team won, the sports book wouldn't pay off on their wager unless the team also beat the point spread that the resident line-maker had established on the contest.

Football and the Sport of Kings may not come immediately to mind as similar activities. But you can find a comparable division of opinion among those who enjoy analyzing and betting on thoroughbred races.
Since it's an indisputable fact that no one can cash a win wager on a horse if it doesn't finish first, modern-day racetrack Lombardis believe that picking winners is what the game is all about. A question they can commonly be overheard asking is, "Why should anyone even consider betting on a horse other than the one that they think has the best chance of coming home in front?"
That query would be valid if winning were all that mattered. But knowledgeable racing fans -- including those who use the revolutionary equine biomechanics handicapping tools available here at www.casetherace.com -- are aware that in thoroughbred handicapping (as with sports betting), there's more to be considered.
Overcoming Take, Breakage, and Other Bettors
Savvy horseplayers know that, in their quest to show a positive bottom line from their efforts, they need to overcome three obstacles that constitute racing's own version of the bookmaker's point spread: (1) the track take, which draws off a portion of the total wagering pool before odds are calculated and winnings are distributed, in order to pay taxes, race purses, and operating expenses; (2) breakage, which rounds winning payoffs down to the nearest multiple of ten or twenty cents, for the stated purpose of avoiding the delay and inconvenience that would be caused by having to pay out winning bets to the penny; and (3) the people standing in line with them at the betting windows.
That last point is what sets betting on horse racing apart from most other wagering games. In the casino, for example, the odds on games of pure chance (such as craps, roulette, or slot machines) are set by fixed mathematical laws of probability. The house knows these odds, of course, and adjusts its payoffs on winning bets so that players never get back quite as much on a winning wager as the strict probabilities of the situation would justify. Players may experience a hot streak, and may even finish ahead if they stop playing while they're in the black. But, because they're continually challenging adverse probabilities that never change, and because they can't predict when favorable results will occur in order to time their bets accordingly, any winnings that they may realize will be totally due to luck, rather than to skill. And, if they play long enough, the unavoidable result must be that they will ultimately lose some or all of the money they started with.
In horse racing, however, despite the challenges presented by the take and breakage, the situation is fundamentally different. At the track, winning payoffs aren't determined by unvarying probabilities that the player can't hope to beat in the long run. Instead, they're set by the proportion bet on each of the horses by the players themselves -- which is why racing is referred to as a pari-mutuel game (meaning "wagering among ourselves"). This is where the bettor's potential advantage lies.
There's nothing that anyone can do about the take and breakage. Those are inescapable facts of handicapping life. That leaves pari-mutuel odds as the one area where would-be winners can exercise some control, and where they must concentrate their attention.
If the odds set by the public on each horse corresponded perfectly to the horse's actual chance of winning, the bettor would again be out of luck. Horse racing would then resemble a casino game, except with a larger disadvantage for the player.
However, the odds on the horses are set by error-prone human beings rather than by unvarying mathematical laws. And unlike a random event such as the toss of a pair of dice, the outcomes of individual races can be predicted with a reasonable degree of certainty.
This means that if individual bettors can reliably gauge when the public's opinion is out of line -- and, specifically, when the public has underestimated a horse's actual probability of winning (making the horse an "overlay" in racing jargon) -- they can play with a consistently favorable edge that will produce long-term profits just as surely as the casino guarantees its revenue by lowering its payout schedule.
| Based on a comparison of the fair odds for each horse with the horse's actual odds (as established by the betting public), horses A, C, F, H, and I were underlays, with odds that were lower than their actual winning probabilities. Horses B, D, E, and G, J, and K were overlays, with odds that were higher than their true winning chances. Horse A (which the public established as the favorite at 5-2) was at such low odds primarily because of its jockey, who was the leading rider at the race meeting. This was an example of the public recognizing a positive factor, but giving too much weight to it, and betting the horse's odds down below fair value as a result, making the horse an underlay that was not worth a wager. (These misjudgments by the public are what make value betting possible.) |
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Horse
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Fair Odds
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Actual Public Odds
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A
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8-1
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5-2
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B
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5-1
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7-1
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C
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49-1
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27-1
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D
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10-1
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11-1
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E
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53-1
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56-1
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F
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32-1
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7-2
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G
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5-1
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6-1
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H
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49-1
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16-1
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I
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9-1
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5-1
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J
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5-2
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9-1
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K
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34-1
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42-1
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|
| That same overbetting on Horse A helped to drive the odds on Horse J (that the fair-odds line had rated as the favorite) up to a level that was over three times higher than its actual chance of winning, making it the best wagering proposition in the field. (However, a horse does not have to be the most likely winner of its race (even according to the handicapper's own personal odds line) in order to be the best bet from a value standpoint. It all depends on the disparity between the horse's fair odds as assigned by the handicapper, compared to the horse's actual odds, as established by the public. In the actual running of the race, horse J (the overlay offering the greatest proportional betting value) won, paying $21.40. Horse G, which was also one of the overlays in the race, and was tied for the second-lowest fair odds, finished second, producing a $196.20 exacta. Horse A finished tenth.) |
Players who adopt this value-oriented perspective avoid the pitfalls and ever-diminishing payoffs that await those who believe that picking winners is the name of the game. Horses that are likely winners of their races are too often overbet, because their merits are obvious to the public. As a result, the payoffs that they return to the bettor on winning wagers are not great enough to compensate for the all-too-frequent times when they fail to live up to the public's expectations. Yes, the most likely winner may be the single best horse in the field. But the value player realizes that no horse ever has an absolute 100% guarantee of winning. That's why he wants the horses that he bets to be overlays, with odds that are higher than the horse's actual chance of winning. That will not only make up for those unavoidable losing efforts, but will also provide the bettor with an added amount as overall profit. By contrast, if the odds the public has established on the horse are too low to justify the risk of betting on it, that horse is called an underlay. Players who insist on betting such horses will find that the horses won't win often enough, or pay enough when they do win, to compensate for the losses on the races where they don't finish first. These individuals are squandering the sizable advantage that racing offers to those who are willing to move from a 'pick-the-winner-at-any-price' perspective to the exciting possibilities created by value-based play.
Different Approaches to Setting Odds
Because thoroughbred handicapping is such a big tent -- with almost as many different approaches as there are players -- there's no one "right" way to go about setting an acceptable odds figure for an individual horse, or for a full race field of horses. Some intuitive people (whom I have always envied) can tell just from a glance at a horse's past performances, or by viewing the horse itself in the walking ring or post parade, what its odds of winning ought to be. Others rely on long experience, a good memory, and/or voluminous record-keeping. Statistically-inclined players find greater confidence and race-to-race consistency by using hard probabilities. And then there are cutting-edge players who follow the latest handicapping breakthroughs, such as those featured by www.casetherace.com, and who obtain an advantage by staying one step ahead of the public through access to analytical tools that other bettors don't possess or know about.
Whichever way a player chooses to go about the quest for wagering value, it will be a rewarding journey that will never become obsolete or outdated.
_________________________________________________
Tim Maas has been successfully value-handicapping and demonstrating its advantages for thirty-five years. His own value-based handicapping titles include Overlay Handicapping; Handicapping Outside the Curve; The Ten-Up, Fourteen-Down Odds-Line Method; and Quick-Line. They are available at Overlay Publications.
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