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 | I have probably tried most of the horse race laying services out there and have never managed to make a profit from any of them in the long term, even on paper, despite their bold claims and impressive strike rates. Laying horses on Betfair - it seems such an easy way of making money doesn't it? After all for those punters who struggled to make a profit from backing horses to win prior to the advent of the Betfair, laying, that is backing a horse TO LOSE, seemed the answer to all our prayers. Simple logic said that if, whilst trying to pick winners, all you had managed was to pick horses which lost, it should be fairly simple to deliberately pick losing horses. After all instead of putting all your eggs in one basket you are effectively backing all the other runners against the one identified as a "donkey". big bash betting 2012 As a consequence, a whole legion of horse race tipping services turned their backs on providing tips for horses which would win and instead became laying services, providing you with tips for horses which they believe will lose. Such logic however is deeply flawed and the rest of this article will explain why. The Determination of A Horse's Starting Price (SP) In the days before betting exchanges, the sole determinant of the SP of a horse was the amount of money being staked on it with the various bookmakers (nowadays Betfair probably has as much influence on the bookmakers as they do on it!). Essentially the art of the bookmaker lies in his ability to create a balanced book of each race, based on his view of the differing chances each horse has of winning the race. In addition to this the bookmaker applies his profit margin and creates what is known as an "over round" book. The simplest way of illustrating this is to consider a 2 horse race in which the chances of each horse are the same. Statistically this means each has an even chance of winning which can be represented as 50-50 or 50%. It follows that the chance of either of the horses winning is therefore 100%. Now of course Mr Bookie won't make any money if the amount he receives in bets for each horse is equal and the price of each is evens because what he makes on the loser he will lose by having to payout on the winner. He will therefore not offer evens (1-1) on each but slightly less - say 5-6. Statistically the chances of each horse is now 55% - (How so? Well now we have gone from saying a 1 in 2 chance (50%) to a 6 in 11 chance (55%). All you need to do is divide the second figure by the total of the two figures and multiply by 100 to get the percentage chance). Mr Bookie now has a book which adds up to 110% giving him a 10% over round and guaranteeing him a profit regardless of the outcome of the race. Don't believe me? OK consider this - if £1000 has been wagered on each horse at odds of 5-6 Mr Bookie will need to pay out 5/6 of £1000 in winnings plus return the £1000 stake. Of course he pays this from the £1000 wagered on the beaten horse and gets to keep one sixth of £1000 as his profit. So he gets in £2000 and pays out £1833.33 in winnings. Thereby profiting by £166.67 regardless of which horse wins. Now let's say Mr Bookie opens up the two horses at the same 5-6 each but finds more money coming in to back Horse 1 compared to that coming in for Horse 2. Say £1100 is put on No 1 and only £900 is bet on Horse 2, now Mr Bookie faces paying out £2013.33 if horse 1 wins and, because he has only taken in £900 for Horse 2 faces a loss of £113.33. What does he do? Easy! He shortens the price of Horse 1 to 4-6 and lengthens the price of Horse 2 to evens. Now if he attracts another £1100 for Horse 1 and £900 for Horse 2 he has liabilities of just £1837 on Horse 1. This is covered by the £900 taken for the other horse, whilst if Horse 2 wins his liability of £900 is covered by the £1100 taken in on losing Horse 1. Either way Mr Bookie once again profits regardless of the result of the race. So.... Prices in a betting market fluctuate based on how much money is being wagered on each selection. SP is an indication then of how much money is taken by bookmakers in the lead up to a race and, the shorter the price of a horse, the more money that has been wagered on it. The betting market effectively determines the relative chance of each horse based on how much money has been wagered on it. This begs the question: how good is the betting market at predicting the outcome of a race? The answer is simple - pretty darn good. The graph below represents the percentage probability of a horse winning based on its SP against the actual probability. In other words how often does an evens shot win? How close to 50% of the time? Do horses that started at 2-1 win 33% of the time? Whilst it comes close mostly the betting market exaggerates the horse's chances of winning and, if we consider Mr Bookie and our example above we already know this. When the same amount of money was bet on each horse the market gave them both a 55% chance of winning but in reality they could not possibly both have had a 55% chance. Accordingly a horse with a 55% chance of winning is likely to win only 50% of the time. What this means is that because the bookmaker has an in-built edge. WINNING MONEY BETTING ON HORSES TO WIN IS EXTREMELY DIFFICULT!! In essence you are not betting against the bookie, because he is likely to make about 1.5% on each horse from his built in advantage. You are therefore effectively betting against other punters, which means "the market". To make money in the long term you need to out perform the market in just the same way as a financial trader. I am sorry to disappoint all those services who promise to "bash the bookie", but bashing the bookie simply makes no sense. For the professional punter, the bookie is crucial because he is the one who pays you out. Not out of his own pocket of course but out of the bets he takes in from the losing punters who account for 99% of total of his customers. But of course those of us who had been trying to do make money by backing horses with the bookmakers for the last twenty years already knew how difficult it was (and still is)! The problem is that once the betting exchanges came on the scene the losing backers figured that if they couldn't make money backing horses to win they surely must if they became layers and backed them to lose! Seven years on they are now left scratching their heads as to why they can't make money from laying either. The answer is simple. Laying services tell their subscribers that a horse is not going to win. They lay that one horse at a price that is significantly higher than SP which of course represents a pretty accurate reflection of the horses chances of winning. That is why as a backer on Betfair, on less fancied horses you can obtain odds that are several times greater than those available from traditional bookmakers. Such a scenario represents a massive value advantage to the backer and explains why layers struggle to make money. Just why a layer is willing to offer me a price of more than 100-1 for a 50-1 shot is quite beyond me but that certainly doesn't stop them nor does it mean the horse won't win. Plenty of big priced horses win their races! So for a small £2 risk on the exchange someone is willing to bet me that my 50-1 won't win and he is so sure of this he has offered double the odds. For his part he is prepared to risk a £200 loss to make a £2 profit on a horse which the bookmakers reckon has twice as much chance of winning as he does! As our selection jumps upside the favorite at the last in whose shoes would you rather be? Next time you visit Racing-Index.com have a look at the top ten lay services over the last 6 months. RI sets the selections odds to SP +5% to produce the tables, but just have a play about with that figure. Try putting in 20% which is the Betfair average (for those services who lay big priced horses the reality will be even higher) and you will no doubt find that profits are few and far between. When you consider that these are the BEST services on Racing-Index and take away the subscription costs, you will conclude, as I have done, that a successful laying service is a very rare species indeed. big bash betting |
