Thursday, February 21, 2008

Handicapping: Odds Lines For Value

Making an odds line might be rudimentary for some, but it is always good to chat about from time to time.

We often hear from new players something like this: "I am going to bet that horse no matter what, because he is a sure winner." Of course that is not correct. If you are getting into a game of coin flipping with someone and he says he will give you 2-1 odds on heads, you are probably a sure winner. If he gives you 1-2 odds on heads, well that is not a bet! The odds determine if a horse is a good bet or not. Not the trainer, not the driver, not the horse. Only the price you are getting.

Each race has an outcome. A winner, and losers. The probability of a race being won by one of the horses is 1.0, or 100%. The horses in the race make up that 100%, each with a lower number. The longshot might have a 2% chance, the even money favorite might have a 50% chance, and so on. All these probabilities must add up to 100%. That is how we make something called a fair odds line.

An exercise: We have a race with five horses. You handicapped the race and gave each horse a chance to win.

Horse A: 20 times out of 100 you think he'll win this race.
Horse B: 2 times out of 100
Horse C: 33 times out of 100
Horse D: 20 times out of 100
Horse E: 25 times out of 100

So, when checking the numbers - 0.02+0.2+0.33+0.20+0.25 = 1.0. There is our outcome. One of these horses will win the race, and the total of their probabilities is 1.0. It is a sound mathematical line.

How do we convert these to fair odds? It's easy. We take this quick formula:

1/odds+1 = percentage;

For Horse A: Fair Odds = 4-1
Horse B: Fair Odds = 49-1
Horse C: Fair Odds = 2-1
Horse D: Fair Odds = 4-1
Horse E: Fair Odds = 3-1

There is your fair odds line. If one of those horses (or more) are higher than the odds that you have handicapped the race, then you are considered to be getting value, and you play. If horse E is 5-1, you play it. If he is bet off the board at 8-5, you look elsewhere.

It is not about horses winning or losing, it is about us winning or losing. The number of "gross wins" is irrelevant. I could hit 85% of my bets on show tickets on heavy chalk, but I might come out a loser. I could hit 1 out of 100 bets on 200-1 shots and come out a big winner. It simply does not matter. You can get value anywhere. You just have to be sure you are getting value.

The next time you see an even money shot that you are thinking about betting on, try this. Look at the first horse, and say to yourself "if this race was run 100 times, how many times would he win?" Do that with several others. Then, saving the even money horse for last whatever you have left over is his odds. More often than not you may find that you have 35 or 40 chances out of 100 left. That means that the even money horse is overbet, and you should look elsewhere. Will the even money shot beat you? Of course. After all, he has a 35 or 40% chance of winning. But it does not matter, because you did not get value.

Next time we will move on to using the above with some hard stats on a few trainers, or angles. We'll show how we can be a winner and a loser in several ways. It should be interesting. As I mentioned I have been trying a few ROI-based angles and it should be a good thing to get my head around in a post. It'll help me a lot to get it down on pen and paper and think about how to be more profitable.

For a look at odds lines, and grinding profit by using them here are a couple of resources. They are books and they are decent reads:

The Four Quarters of Horse Investing
(Fierro, 2001)

Value Handicapping
(Cramer)

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