Wager Bifurcation Point

Dynamic Contender Valuation

Thoroughbred Racing at Santa Anita Park

Three minutes to post and you're about to make a play on a legitimate win contender offering 9:2 (nine-to-two) odds, with a quick glance at the board from the betting line, you notice the public has taken interest in your horse; bettors have driven the price all the way down to 3:1 (three-to-one) at the last tick, you step out of the line wondering what to do.  At odds of 9:2 (nine-to-two), $20 to WIN would've paid $110 but at 3:1 (three-to-one) odds, the payout will be $80; a 27% reduction, is the play still worth the risk of a wager?

 
 
The Racetrack Takeout

To understand the true value of a wager, horse players must consider that it's possible to win every wager and still end up losing money.  In fact, the data reveals that if a player wagered on the favorite to WIN every race for a year; the player will cash approximately 33% of all wagers and end up with a net loss.  The reason for this is known as the takeout.

Specifically, the funds which the racetrack "takes out" of the betting pools in order to fund the expenses of putting on the races, such as purse moneys, racetrack and facilities maintenance, human resources and the like; although the rate varies among racetracks, usually somewhere around 15% on a basic WIN bet, to as much as 25% for some of the exotic plays.  In ths discussion which is primarily for the benefit of new horse racing fans, we refer to the takeout rate for WIN bets.

At Santa Anita Park the takeout rate on a WIN bet is 15.45%, thus the horse player who sets aside $100 to wager and walks into Santa Anita, will be starting the day with a grand total of $84.55, already down 15% by virtue of just walking in the door; and it's the same at every thoroughbred racetrack in the world.

Consider again the hypothetical, a 27% reduction in payout is actually compounded by the fact that if your horse wins, that $20 wager will be paid as if it were a $17 wager; this knowledge undercores the need to obtain value for every dollar wagered but how much value?  Supposing the odds come down to 5:2 (five-to-two) or 2:1 (two-to-one), the expected payout for the same $20 wager falls from $110, to $80, to $70, to $60; What would be a fair amount to accept?  What would be the rock bottom?  Where does the player draw the line?

 

Fair Odds

 

The short answer is simple.  Any time a horse player places a wager while accepting less than fair odds in lieu of full dollar-for-dollar value, the player is at disadvantage and will lose money in the long run due to the racetrack takeout.  Fair odds are equal to the raw odds as calculated from a horse's probability of winning, then adjusted by increasing those odds to account for the racetrack takeout; in an amount equal to, the product of the probabilty percentage multiplied by the takeout rate.  Horse players must receive no less than fair odds on every wager in order to profit at the races over the long term.

 
Wager Bifurcation Point

 

The long answer is a bit more complicated.  Since probability tends toward an expected value over time, a single race will be inconsequential when viewed within the context of a block of 1,800 races.  To explain further, a proprietary formula considers the strength of any advantage in WIN probability, to run a series of calculations through multiple itterations; thus building a model that reveals the mathematical point at which probability will no longer be able to reach its expected value within the next 1,800 races.  The wager bifurcation point is the point when the horse player must part company with the play because it will no longer be a profitable wager over the long term.

 

CU@the$window!

I Like What I See Start My Free Trial Today!