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LAYING HORSES FOR PROFIT

How many of us have wished we were stood on the other side of the pitch as we stand at a racecourse watching the readies change hands? Pretty much all of us at some point in our gambling lives I suspect! Well, thanks to the innovation of the Betting Exchange, we can all ‘play bookmaker’. Before we go into the world of laying horses, for those who have yet to discover, lets just have a look at the concept of the exchange and how it works.

Betting Exchanges

A relatively new concept, betting exchanges have revolutionised the betting industry. Punters can obtain better value, better SP’s, and the successful gambler will not have his account closed. In addition, the punter can hedge their risk, trade in running and play the market, trading in and out at favourable odds. Betting exchanges have taken the bat off the traditional bookmakers and handed it to the punter. It is now much easier to make a living from betting on horses by using the betting exchange as a tool.

Betting Exchanges (BEX) make their money by taking a commission off the successful party in a bet. If person A lays a horse at 2 (even money) for £10, then he will either win £10 or lose £10. The BEX care not who wins and loses, but they take a commission (typically 5%) of the winner so the loser in the above transaction will lose £10, the winner will win £9.50, and the BEX will pocket £0.50.

The biggest advantage with a BEX market is that it will trade very close to 100% (and often less for momentary periods). Typically, the closer the race to the off, the nearer to 100% is the book. This effectively means that the over-round consists of the 5% commission. Therefore it is equivalent to a book of 105%. This is largely true whatever the field size. This means that the more runners in a race, the bigger the advantage in using the BEX over a traditional bookmaker, where the over-round percentage is typically bigger the more runners in a race. I am referring to the win market here. We will look at the place market as a separate issue later on.

It is vitally important to understand the workings and characteristics of the betting exchange. As a general rule, the longer the fixed odds price of a horse, the bigger the difference we would expect to see in the numerical price. What I mean by this is a 33/1 shot may well be around 90 or 100/1 on the BEX. This may only be a 2% difference; the same as say between 6/4 and 13/8 but it highlights an important fact. Generally, the outsiders are under priced on the fixed odds market in that on average, roughly one in a hundred 33/1 chances are successful. If we backed every 33/1 shot at 100 on a BEX, then we may expect to break even before commission. What this means, is not that outsiders are intrinsically good value but rather if we fancy an outsider, it is usually worth backing on the exchanges over fixed odds bookmakers. I rarely bet in Ireland, but their books are incredibly over-round. In their typically big fields, often the outsiders are many in number but are only 20/1 or even 14/1 when we would expect them to be 100/1 in reality. I would suggest that there is every reason to open an exchange account if you follow Irish Racing.

It is also important to remember that exchange prices are usually shown as  Decimal Odds as opposed to Fractional odds as traditionally used. So, a 6/4 shot would be quoted as 2.5 on the exchanges (1.5/1 + stake = return 2.5). An 11/10 shot 2.1; a 33/1 shot 34 and so on. 

I don’t propose to add screen shots etc to fully explain the layout etc of exchange sites but they all have adequate guidance for the newcomer.

Laying Strategies

In a sense, all that we talked about in terms of value and 100% books above, works against us when we try to adopt a laying strategy. If we are laying a 100% book and paying 5% commission then we are going to struggle. With laying, there are two main things we have to get right. Lay the right horse, and lay them at the right odds. That is not so different from a successful backing strategy in reverse, but the latter – laying at the right price becomes more critical. If we back a horse that drifts out big style after we place our bet, then we probably lose our money. If this were going to happen then the price matters not. If we win, well, we should have won more but we are happy short term. If we lay a horse at a fancy price and then the price tumbles, we may well have reason to panic. Our chance of losing our money is now much greater than we suspected. We can look at backing the horse to limit our liability whilst taking a definite hit on the race whatever the outcome; but that is not great either. Long term we are on a fast train to PoorLand if we lay horses at the wrong price. In short, if we back a horse that drifts right out in price our net profit & loss over the year will be affected more by the loser, not the price it lost at. In laying, we will be successful or not depending on laying at the right price. Whilst exactly the same principals apply in terms of value being the key to being successful, we need to consider that the market movements might be showing us a different picture to that which we see when backing a horse. If we consider a typical poor grade AW handicap with mostly exposed horses; we might fancy horse A who has had 40 races, is exposed and not up to much but we fancy that conditions on the day are right for the horse and at 9/1 he rates a value bet and we have £100 win. Supposing we have the same situation in 20 consecutive races. Assuming our prediction is neither right nor wrong, we might expect on average to win 5 races and return our £5,000 stake with no profit or loss. Suppose in one of these 50 races, it turns out that an unconsidered horse with a dismal profile has been set up for a good old fashioned coup. This horse is backed in from 50/1 to 7/2 fav and duly romps home. In this case, our 9/1 bet drifted out to 16/1, 20/1. 1,000/1 – it doesn’t matter! We were not going to win this race.  By chance alone, our return would now be £4,900. So, this gamble on another horse has cost us £100 or 2% of our stake over 50 races.

Suppose now we decide to lay a 49/1 outsider to lose £100 a race. Again, over 50 races, we would expect to lose 1 time so our risk of £5,000 would result in us winning £2.04 x 49 races (£100) minus our £100 loss in the one race we got wrong. Again, we break even. If we apply the same logic, if one our 49/1 shots is backed in to 7/2 and romps home, we have lost £200 and won 48 x £2.04 (£97.92). This gamble has now cost us £102.08, or approx 2% of our risk, very similar to the figures above.

The difference is that if we expected all our 9/1 win bets to have a 5% better chance than the odds reflected, then we would expect to win on average £5 a race. If the gamble happened, then we would have lost 20 races worth of profit. In the lay example, we would have lost approx. 45 races profit.

In conclusion, there is no mathematical difference in backing and laying. If you always backed or laid at the ‘true’ odds – you would break even in either case. However, if you are on the wrong side of a gamble when backing another runner, then that is less serious then laying the gamble at the biggest price.

Reverse Value

If you intend to make a profit from laying horses, it is important to understand that the market probably knows better than any one individual. Where there are races with unraced or unexposed horses, then the market signals should play a big part in your assessment of the race. This creates what Excel would term a 'Circular Reference'. Suppose trainer X has 3 runners in a 3-y-o maiden and the jockey bookings are inconclusive. Imagine that you have a tissue price on the 2 most fancied of 8/1, with 25/1 on what you consider the outsider. When betting opens you pay close attention and  runner A opens up at 8/1 as does runner B. You may consider that you have priced them correctly and neither back nor lay them. Suppose that runner A is backed heavily into 4/1 and runner B drifts out to 16/1. In theory, your tissue price of 8/1 about what is now a 4/1 shot screams 'Lay' whilst you plan to back the 16/1 shot as it must be good value. This may all work, but more often than not it will not work because the 4/1 shot is clearly thought more likely to win than its stablemate and in the long run this will be borne out in the results. The market is indicating the true value of each runner in this type of race. The same logic applies in unraced 2-y-o races, NH bumpers and any other race involving hard to assess animals. So how should we make money in this circumstance? The best strategy is to follow the market. If runner A opens up at 8/1 in the morning and is backed across the board into 13/2, then there is every chance that it will start shorter and although you have missed the 8/1, the 13/2 may still represent good value. Conversley, if runner B rapidly moves from 8/1 to 10/1 with most firms, there may well be value in laying that selection as it will probably move higher than 10/1.

A Typical Race - Exposed Horses

Let us now look at a sprint handicap over 5f in which all the runners are relatively exposed. This presents a very different opportunity. A lot of the risk element associated with the unexposed horses has been removed. Now we have a race where we can analyse and assess based on the form book and other transparent factors. Handicaps offer the best opportunity to make a profit as discussed elsewhere on this site and we can play this race back and lay if we can ‘tissue’ the race. It is worth spending time on the tissue prices as these will ultimately determine the profit (or lack thereof).

As an example, lets assume 3 runners with tissue prices;

                                          101                     101

On WBX, the market opens up at   2.22, 2.75, 5

Using the tissue spreadsheet (supplied to clients free with any monthly subscription); we can see that 2 bets are advised, on horses A & C

Lets place those bets and enter them into the spreadsheet.

                                          101                     101

Now we have placed all the recommended bets. Suppose the prices move as follows;

If we thought HORSE C good value at 5, then at 6 it should be even better value. Conversely, we are happy to lay HORSE A further at the shorter price. Our spreadsheet now looks like this;

                                          101                     101

Placing the extra bets gives us;

                            101                101

Things now reverse dramatically and so we are able to lock in an amount of profit on both Horse A and Horse C.