Different Ways to Bet
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The 3 main methods for betting are with the Bookmaker, Tote & Exchange.
The Traditional Bookmaker
The traditional way of betting throughout generations has been The Bookmaker. As the name suggest this method of betting is based on an individual or bookmaking firm advertising odds and accepting bets on the outcome of an event. Obviously the bookmaker’s objective is to ensure that the odds provided will afford a profit no matter what the outcome is and to achieve this, the odds are adjusted to include a margin which is less than the true probability.
Consider the following:
In a 3 horse race the true (expected) probability of the race, given what is known, is thought to be
Horse 1 1/1 (evens money)
Horse 2 2/1
Horse 3 5/1
for 1/1 to calculate the probability take right hand digit “1” and divide by the sum of left hand and right hand digit “2” = 1⁄2
for 2/1 to calculate the probability take right hand digit “1” and divide by the sum of left hand and right hand digit “3” = 1⁄3
Evens (or 1-1) corresponds to a relative probability of 1⁄2 (50%)
2-1 corresponds to a relative probability of 1⁄3 (33.33%)
5-1 corresponds to a relative probability of 1⁄6 (16.66%)
By adding the percentages together a total 'book' of 100% is achieved (representing a fair book). The bookmaker, in his wish to avail himself of a profit, will invariably reduce these odds - possibly to the following:
Horse 1 4/5
Horse 2 7/4
Horse 3 4/1
4-5 corresponds to a relative probability of 5⁄9 (55.55%)
7-4 corresponds to a relative probability of 4⁄11 (36.36%)
4-1 corresponds to a relative probability of 1⁄5 (20%)
By adding these percentages together a 'book' of 111.9 % is shown. Anything greater than 100% i.e. 11.9% is known as the overround and represents the potential profit depending on the proportional spread of betting on the 3 horses. If the bookmaker is capable of accepting the correct proportion of bets he will pay out only €100 (including returned stakes) no matter what the actual outcome of the race.
A stake of €55.56 @ 4-5 returns €100 approx. if Horse 1 wins.
A stake of €36.36 @ 7-4 returns €100 approx. if Horse 2 wins.
A stake of €20.00 @ 4-1 returns €100 if Horse 3 wins.
However achieving this is an art in itself however managing the spread of bets taken and by astute book “making”, the bookmaker can ensure that he achieves as much of this overround % gain as possible to maximise his profit and minimises his risk.
The Tote is based on a betting pool formed from individuals placing money on a race. The price paid for a win or place is based on taking a small percentage i.e. commission, from the total pool before dividing the remaining pool by the number of winning tickets. Therefore prices shown in advance of the start of a race will fluctuate as new bets continue to be placed.
Horse 1 has 100 (€1) units for a Win
Horse 2 has 75 (€1) units for a Win
Horse 3 has 25 (€1) units for a Win
Therefore the Total Pool is €200 less 10% (€20) commission for Tote organisation leaving €180.
If Horse 1 wins the Unit (€1) winning return is 180/100 = €1.80 or odds of 4/5.
The final payout cannot be calculated until the market is closed i.e. race has started whereas bookmakers can offer either SP (starting price) or a "board price", that is, a guaranteed payout at a given price for a winning bet.
I say to my colleague – “I fancy Horse 1 in this race” to that my colleague replies “No way – hasn’t a chance, I’ll lay you a fiver it doesn’t win”. Hence the concept of Exchange betting. We have an individual who wants to bet and another who is prepared to lay that bet. Each place their fiver on the table and whoever wins takes the tenner. In the case of Exchange betting the exchange “minds” the tenner until the outcome is known. Exchanges make their money by charging a commission which is calculated as a percentage of net winnings usually about 5%. Hence the winner of this bet would collect €9.50. For the Exchange to operate it requires one or more opposing customers willing to match their bets.
Seldom are bets struck on a 50-50 or even money basis as our example illustrates. If a Punter A is willing to take 1.5 ( 1 to 2) and an opposing Punter B is willing to lay it then A puts down €2, B matches it with €1 giving a sum of €3. With the exchange taking 5% the winner will receive €2.85 in return.
Laying one horse in a race is just the same as backing all of the other horses to win.
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