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Making Odds
by
Charles Carroll
Making your own odds line “by hand” is an excellent tune-up for your personal handicapping (see Part 1, last week). However, once you’ve tuned up, you may prefer to computerize it. Computerizing the line frees you to put your attention where it almost has to be today: planning your bets against the moving target of the public odds. The days when you could pick up a Form and be excited simply because you think you have figured out which horse is going to win are long gone. The job, now, is to constantly roll with the public’s odds. You search for “value”—and avoiding being stiffed. So before you start computerizing and leave the nuts and bolts behind, you should spend a little time just looking over an odds table. It can be both an educational and a humbling experience.
A couple of weekends ago, at Hollywood Park, the entry of Bienamado and Single Empire, with McCarron and Desormeaux aboard respectively, went off at 1 to 10. That is ONE-to-TEN—UNO a DIEZ. Odds about as far “on” as they can go. I didn’t handicap the race, just happened to catch it on TV, and sure enough, Bienamado won and paid $2.40 to Win and $2.10 to Place, while Single Empire ran third for zilch, as there was no Show money due to the entry. You’ve got to wonder how these things happen. Not that there were two good horses with great riders coupled as an entry and that they performed as advertised. A few years back, I saw a four-horse Jack Brooks Quarter Horse entry in a big dollar race cross the finish line one, two, three, four—exactly as predicted, but I don’t think even that 4-horse entry was at 1 to 10. Just this past weekend, another three-horse entry by Brooks did exactly the same thing at Ruidoso and paid $2.80—still not as “on” as the Hollywood Park Bienamado entry.
Odds of 1 to 10 mean that in the public’s opinion, that horse (or entry) has a 90.91% probability of winning. (A reference table of odds and corresponding percentages can be found in the article library of iCapper)
If you are handicapping a race with ten or twelve horses in it, how bold do you have to be as a handicapper to set an odds line with a horse rated at 1 to 10? If you have been to the races more than once, you know something about “racing luck” and its converse, racing bad luck. I’d venture a guess that simple racing bad luck can affect more than 10% of any horse’s performance capability. The horse next to it in the gates can rear up. Fabulous horses can stumble at the start. Great horses get boxed in by lesser horses. Jockeys go too wide, or try to squeeze too close to the rail. You name it, it happens. There is a greater than 10% chance that any given horse will get less than a perfect trip. How much, then, do you have to like a horse to say that although it may have to overcome a bad trip, it still has a 90.91% probability of winning?
I cannot imagine ever making a horse 1 to 10 in my own odds line—giving that horse a greater than 90% probability of winning in a field greater than two—much less betting on it. Which brings up an interesting point: just how far “on” would you be willing to go when setting odds on a stand-out horse and—assuming you are even a tinsy bit conservative—why is the public willing to go so much further?
It sometimes seems that newer, grander notions of “the crowd” have crept into our basic concepts of the sport. I sometimes suspect this was a subtle influence of the Dr. Z syndrome, which included a basic premise: “The crowd is smart, so let them do the handicapping and analyze them.” Well, the crowd is not that smart. In fact, the idea is sort of self-contradictory. It the crowd was really smart, there would be no overlays for “Z-market analyzers” or more normal run-of-the-mill handicappers. You don’t have to look far for evidence. One of the quickest proofs is the crowd’s “piling on” over-bet underlays.
So that we’re all on the same page, an “underlay” is a situation in which the odds pay-back for a horse is less than its legitimate shot at winning—or more accurately, pay-back is less than the risk imposed by its legitimate shot at losing. For example, suppose you do your best handicapping and develop an odds line, as suggested last time, and you make your best horse a legitimate 4 to 1 shot. Suppose too, that you are good at this and have confidence in your line. The public odds at Post Time drop to 2 to 1. Your handicapping gave this horse a 20% (4 to 1) chance of winning this race—conversely: an 80% chance of losing. If you had made this bet at your “fair odds” of 4 to 1, you would get back $4 for each dollar bet. However, the public is only offering to give back $2—even though the risk is exactly the same. That’s an “underlay.” Conversely, say this horse is your top pick at 4 to 1, yet the crowd loves another horse, which you have pegged as a false favorite, and offers you 6 to 1. That is better than your “fair odds,” and it is an “overlay.” Overlays are the key to a gambler’s edge in horse race betting (see the earlier article, “Finding Your Edge), and there is a lot more to “overlays” than simply exceeding “fair odds.” One of the fundamentals is that before the race is run, no matter how good you are—NOBODY—not you, not the crowd, not Steve Wynn, not even Jimmie The Wasp and Lauren Stich during their Balley’s triumph—knows exactly what the true odds of the race are.
Since there is always some error in the “fair odds” that you estimate, you will eventually go broke if you accept only “fair odds.” In order to buffer against the inherent error of your pre-race odds line, you have to sit on your money for fair odds as well as underlays.
Underlays can happen in any odds range; they don’t have to be “odds on.” In fact, it’s probably more common at more normal odds ranges. A horse you make 10 to 1, with no prayer as a contender catches the crowd’s eye and drops to 4 – 1, becoming a drastic underlay.
Most of this has to do with simple mob psychology. You’ve seen it happen: your 10 to 1 horse—a completely dead piece—is sitting at 25 to 1, and ten minutes before post time, blind long-shot betting kicks in and it rapidly drops to 6 to 1. I’m sure you’ve also seen these same blind long-shot bettors turn away from the window, look up at the odds board and mouth surprise. If you’re a good lip-reader, you’ll see more than that. They were caught in a landslide and don’t know what hit them—they thought they were getting 25 to 1—what happened?
Blind long shot betting is the road to ruin, but at least it’s simple, straightforward, and I can understand it. What I do not understand, is eyes-wide-open “piling on” of large amounts of betting dollars onto big, fat—obvious—underlays.
At 1 to 10, in order for the Bienamado entry to be an overlay, what would you have to make its fair odds? One to fifteen? One to twenty? The fundamental criterion of value betting is that the horse is offered at greater than fair odds. So in order to be a “value bettor” and bet on a horse at 1 to 10, you would have to strongly believe, based on your own handicapping, that this horse had a better than 1 to 10 chance of winning—say, 1 to 15. Maybe you could imagine this in some bizarre scenario in which Cigar in his prime might be dropped into a $2,500 claiming race at Bandera Downs, but in the reality of carding races, there has rarely been such a thing as a true 1 to 15 horse.
One of the oldest angles of railbirds was to watch for sudden drops in odds, just before post time. The idea was that this was the “smart money” and you could jump on for the ride. Sometimes this one even worked. However, when the drop is not sudden and noticeable, but prolonged and extreme, it is not “smart money”—it is dumb money. When odds start getting down into the “even money” (1 to 1) range, you can be pretty sure that the cash flow is not coming from value bettors.
Value bettors would have to be giving this horse “fair odds” of greater than 1 to 1 to take this bet. When the odds on a favorite get down into this range—and would continue declining if the track didn’t mercifully stop the madness by loading the horses into the gates—this is simply “piling on” by the crowd. Which is actually a wonderful thing—even though it may sometimes kill your opportunity to bet on a race you worked hard to handicap. It proves that the public is not made up of genius value bettors, and that the herding instinct remains strong. It is extremely wonderful if you never liked their choice in the first place and by piling onto their even money horse, they relieve the pressure on your personal favorite—a legitimate 3 to 1 horse—now standing at a juicy 7 to 1. That’s an overlay and that’s next week.
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