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‘Money Without Work’ 5: Bookmaker Concessions – Each Way Betting

14 June 2020/in Horse Racing Blog/by Russell Clarke

The fifth part of this series goes hand in glove with the preceding episode about bookmaker concessions. To review the other previous articles, go here.

Last time we looked at a range of bookmaker concessions, and when they offered positive expected value, writes Russell Clarke. This week the focus is very much on each way betting and, specifically, 'extra place' races.

The mathematics surrounding each-way betting and extra place concessions is complicated and many factors have to be taken into account including the price of the horses concerned and the pricing make up/shape of the betting market on individual races. So, I will deliberately simplify, as follows:

Current e/w terms are typically

Non-handicaps: 5-7 runners, ¼ odds (2 places)

Non-handicaps: 8+ runners, 1/5 odds (3 places)

Handicaps: 5-7 runners, ¼ odds (2 places)

Handicaps: 8-11 runners, 1/5 odds (3 places)

Handicaps: 12-15 runners, ¼ odds (3 places)

Handicaps: 16+ runners, ¼ odds (4 places)

On these terms, we can mathematically calculate which races may favour the punter over the bookmaker in place terms. There are only two!

Let us look at the place part of the bet only... For ease of mathematics in a 9-runner race the true odds of a place are 6/3 (6 unplaced and 3 places in a 9 runner race) or 2-1 (3.0), but the place odds paid are 8-5 (2.6, assuming all runners have an equal 8/1 chance of winning and place odds are 1/5).

That is poor value, even if the assumption of all runners being equal is simplistic/unrealistic. Using the “all runners are equal” assumption, the only races where the place terms are in the punters' favour are 16+ runner handicaps. In a 16-runner race the true place odds are 12/4 (12 unplaced and 4 placed in a 16-runner race) or 3/1 (4.0), and the place odds paid are 15/4 (4.75, assuming all runners have an equal 15/1 chance of winning and place odds are ¼). The same equation can be used to calculate races with a different number of runners. Remember, there is no profit margin built into the bookmaker prices in these examples which is also, of course, unrealistic.

On a more practical level, an empirical analysis was undertaken for all of the races during the Flat 2018 season that calculated, from the starting prices, the overrounds (profit margins) that the bookmakers enjoyed in all races (win and place). Obviously, there was a positive overround for all win bets in all races. However, the place market (because bookmakers were arbitrarily offering 2, 3 or 4 places and 1/4 or 1/5 odds) tells a different story:

Non Handicaps: place overround by number of runners

In non-handicaps, in every race there was a positive place overround in favour of the bookmakers. However, in 8-runner races this was only 2.1% (compared with 18.3% for the win market). In 9-runner races it was 5.2% (compared with 18.7% for the win market). In these instances, you are better splitting your stake into an each-way bet than betting win only (this was also true, albeit to a lesser extent, in 10-, 11-, 12- and 13-runner non-handicaps). For reference, betting in a 16-runner non-handicap the place overround is an eye-watering 34.8% and this gets worse still as the number of runners increase. Playing each-way in such races is betting suicide.

Handicaps: place overround by number of runners

In handicaps, the story is a little different, because of the better place terms. In 16- and 17-runner handicaps there is actually a negative overround - an underround - of -3.5% and -1.5% respectively. This means that the place element in an each-way bet in 16- and 17-runner handicaps is actually in the punters' favour!

Overall, the place overround is below the win overround in 8-, 9-, and 12-plus runner races. So, in these races, splitting stakes for each-way betting is optimal over win only betting. In races of 5, 6, 7, 10 and 11 runners the reverse is true and you should bet win only.

Here are some tables that tell you the optimal bet (win or each-way) and the % advantage win/each-way bet has over the alternative win/each-way bet.

Non Handicaps: Win or each way? By number of runners

Handicaps: Win or each way? By number or runners

At this stage, bear in mind all of these numbers are at starting price. You can, therefore move these percentages more into your favour by taking the best prices available and simultaneously utilising Best Odds Guaranteed.

It should also be borne in mind that these are strictly comparison figures. Some of the WIN advantage percentages are only as high as they are (for example 7-runner handicaps at 13%) because the each-way alternative is so poor.

Key win vs each way points

The salient points from these tables are:

- The sweet-spots for each way betting are 16- and 17- runner handicaps.

- Each way betting is particularly advantageous (relatively) over win only betting in 8-10 runner non-handicaps.

This, in all probability, is a function of the reality that such races will be less competitive and have ‘lopsided’ markets dominated by a short-priced favourite; or, there is a big spread in prices (which is less likely in a handicap). In these instances, the mathematics make each-way betting more favourable.

Extra Place Each Way Betting

But what happens when the bookmakers offer extra places? And what effect does the tactic of reducing the fraction from 1/4 to 1/5 have on such offers?

The maths is not easy, so you may have to trust me here! I have restricted this analysis to handicaps (which is where the offers generally occur anyway).

Handicap extra place: 5 places instead of 4

If the offer is five places instead of four but odds are reduced to 1/5:

This makes the overround negative for bookmakers on the place part of the bet in races with 16, 17, 18, 19 and 20 runners (rather than just 16 and 17 runner races under the normal terms). In 16 runner races the negative overround increases to about -10%, which is a huge boost for punters!

Handicap extra place: 4 places instead of 3

If the offer is four places instead of three but odds are reduced to 1/5;

This makes the overround negative for the bookmakers on the place part of the bet in races of 12 and 13 runners. It also makes the place overround less than the win overround in all races from 12-15 runners. This means that all bets should be each-way rather than win bets when this concession is offered.

Handicap extra place: 3 places instead of 2

Finally, if the offer is three places rather than two (a rare bird):

This makes the overround negative for the bookmakers in 5- and 6- runner races (11% and 2% respectively) and still makes the place overround (although now in the bookmakers favour) less than the win overround in 7-runner races.

Again, these numbers assume starting price overrounds and you can reduce these substantially by taking the best available prices and simultaneously utilising best odds guaranteed.

Extra Place Concessions: Summary

Extra place concessions are highly favourable to punters and make each-way betting (in the majority of cases) mathematically optimal. You should therefore take advantage.

Of course, in certain big races, bookmakers get even more 'generous' and offer 6, 7, and occasionally 8 places, and on these occasions they should be viewed as “loss leaders” from the “soft” bookmakers that you can take full advantage of until they won't let you any more!

A final, important, caveat is that you must not accept enhanced place terms at the expense of ‘skinny’ win prices, and so some judgement is required.

Concessions are generally utilised by bookmakers to gain new clients or to gain client share from rivals. They invariably offer a degree of value and that degree can be calculated via the techniques shown in this article. Some are generous enough that they reward blanket support! Most will add to your bottom line if used judiciously.

- RC

‘Money Without Work’ 4: Bookmaker Concessions – What Are They Worth?

9 June 2020/in Horse Racing Blog/by Russell Clarke

In this fourth article (previous instalments here), I am going to look at concessions that are offered from time to time by the "soft" bookmakers; and how we can assess if these concessions or offers are worthwhile, writes Russell Clarke.

The definition of "worthwhile" is exactly equal to "profitable" and, whilst we cannot know if any individual offer will be profitable, we can calculate (with the help of the “sharps”) whether, in the longer-term, these offers give us a "positive expected value" (known as EV+). At the most basic level, for example, if you are offered "enhanced odds" by a soft bookmaker, you can check if they truly are enhanced by examining the equivalent price with a sharp.

You should take advantage of whatever offers/concessions bookmakers are making when there is positive expected value. The market is a competitive one and bookmakers are keen to secure business.

The Fab 4 Bookmaker Concessions

The four most important concessions are:

- Generous Account Opening Offers/Reloads/Ongoing Offers

- Best Odds Guaranteed

- Price Boosts

- Enhanced Place Terms

Let's look at each.

Opening Offers/Reloads/Ongoing Offers

Opening Offers are obviously 'one-offs' so should be utilised but are clearly short-term. Some bookmakers do subsequently offer clients concessions to encourage loyalty. In the world of soft bookmakers, the competition for new clients is fierce. This is reflected in the offers they make to encourage punters to open accounts.

The generosity of the offers appears to ebb and flow, and often the best time to avail of the most generous offers is prior to the leading racing festivals such as Cheltenham, Aintree or Royal Ascot, or prior to major sporting events such as the World Cup. If you don’t have an account with any of the scores of bookmakers available, then before such events is often the optimum time to join as the offers can be especially generous.

Account opening offers tend to fall into different categories:

- Bet x, Get y in free bets: One of the better ones of this genre in recent times was from Bet365 where you could deposit up to £200 and receive the same amount in free bets once you had bet your deposit.

- Risk-free sign ups: Bet x and get y back as cash if your bet loses. This is, in effect, a free bet.

- Multi-bet Offers: Bet x and get y back as cash/free bets, but released in stages. The idea here is to get you 'used' to betting with the company involved.

- Profit Boosts: A profit boost (often 100%) on the return from your first bet.

- Miscellaneous: A good example might be 0% commission with an exchange for a period of time.

Almost every bookmaker offers an incentive that is a derivation of those above to open a new account. They all have a common denominator, which is a positive expected value (or EV+), more of which later. In essence, they offer real and measurable value to us as punters. You should look to take advantage of ALL such offers and try to ‘time’ your new account openings to coincide with the more profitable offers.

Related to opening offers are the ‘Reload’ offers that some bookmakers give to existing clients from time to time. These are designed to get you betting with the respective bookmaker and are often watered down versions of the opening offers. These can offer EV+. An example as I write this article was Paddy Power offering up to £10 cash refund on a £10 bet on Dortmund v Schalke if Dortmund win (they did).

Finally there are ‘Ongoing’ offers. The best example of these are the Weekly Bet Clubs run by a number of bookmakers, typically a free £5 bet if you stake £25+ on any given week. Again this is designed to get you to bet with them regularly: if you are betting £25 typically, then it is a neat bonus for simply having £12.50 e/w in an enhanced place terms race at best odds guaranteed. Be rude not to!

Bookmakers want your business and are prepared to offer ‘loss leaders’ to sign you up, and further incentives to keep you betting. So, take advantage. They may be less keen on you when they recognise you only bet in EV+ situations, but you should cross that bridge only when you come to it!

Best Odds Guaranteed

Previously we have looked at the Efficient Market Hypothesis and how the “closing line” (Betfair Starting Price in horse racing) is the most accurate representation of the market. In order to beat the market we have to aim to consistently take odds that are greater than the closing line. One bookmaker concession that helps us to do this on a regular basis is Best Odds Guaranteed.

It should already be clear what a valuable concession BOG is. In the correct hands it enables you to bet at early prices (really valuable to punters who can correctly identify “value”) with the guarantee that you get a bigger price if you are wrong (and even the shrewdest will see the market move against them on a fairly regular basis). In effect you are betting against the bookmakers’ odds compilers when betting at BOG. They are quite a shrewd animal, but by definition cannot be the beast that is EMH or the “wisdom of the crowd” (which is what BSP or the closing line represents).

So, if you are skilled and have a profitable strategy, betting at BOG is optimal over BSP, despite the minimal margin you are attempting to overcome with the latter. Conversely, if you have a losing strategy, you would be better off betting at BSP and simply losing the low margin (essentially your commission), which amounts to a more enjoyable - or at least longer-lasting - punting demise!

There are examples when betting at exchange prices in the 15 minutes before a race (to assure liquidity) is optimal over BOG. One such example might be outsiders in big fields, or in races where a win bet is optimal over an each-way bet. But these are specific circumstances and should be viewed as exceptions that prove the rule. As a profitable punter you should utilise BOG for as long as you're able: it is one of the key concessions that the softs grant.

On almost any set of profitable results, BOG returns will be better than BSP. BOG should be your first call, exchange prices next (once the market is at 103% or less) and, finally, Betfair Starting Price. Never, ever, EVER bet at industry starting price.

I have a couple of real life examples of profitable strategies and the difference between SP and BOG, and then the difference between BSP and BOG:

The first example sees a series of 234 bets with a high percentage of winners (60%). The 141 winners brought a level stake profit of +22 at Starting Price (9.4% ROI) and +44 at BOG (18.8%ROI).

The second example comes from a shrewd gambler who some of you will know from his articles (I won’t name him). His last 480 bets have shown +75 at Betfair Starting Price (15.6%ROI - he’ll never keep that up!) but the same 480 bets are +190 at BOG (39.6%ROI - again, he’ll never keep that up, but it demonstrates the difference between BOG and BSP if the prices move!)

Those may be extreme examples, but they demonstrate the potential difference when a methodology identifies value before the market gets progressively more informed. If you have a winning strategy then BOG will outperform BSP. If you have a losing strategy, then BOG will obviously still beat SP, but is less certain to outperform BSP.

Price Boosts

Price Boosts are offered on an ad hoc basis to existing customers. Typically they will be available for a limited time and often to limited stakes. They are available on all sports and can be a simple price enhancement on a single horse, for example “was 7/4, now 9/4”, or an enhancement on a football accumulator. Most price boosts (but by no means all of them) offer EV+ but this should be checked rather than assumed.

Explaining how to calculate EV+ (positive expected value) is probably best done by way of an example. So, let us imagine a football accumulator being offered by Hills:

Man City/Liverpool/Brighton all to win at 11.0 (10/1).

How can we calculate if there is any real “value” in this offer? To do this we rely on the sharps to be the most accurate guide as to the true price of the 3 teams winning. In the football market we can use a company called Pinnacle and adjust their odds to 100%, or the Asian Markets, or the lay price on the exchanges. Let us assume Man City are 1.27, Liverpool 1.66 and Brighton 4.1 to lay on the exchanges. Multiplying these figures together we get 8.64 (1.27 x 1.66 x 4.1).

So, in this instance the bet has a Positive Expectation of 1.27 or 27%. This is calculated by dividing the price offered (10/1, or 11.0) by the true odds (8.64).

In real terms this means that if you placed this bet 1000 times at £1 per bet, your £1,000 stake should, in theory, return £1,270! At this point, I should point out that, in the real world, we have to put up with something called “variance”. That is definitely another article in itself (as you are soon to find out!) but, in theory, you have a bet here with a mathematically sound 27% positive expectation.

Virtually every “price boost” you see from a soft bookmaker can be evaluated in this way. You simply ignore all negative expectation “boosts” (if the price being offered in the above example was 7/1, then the expectation would be below 1.0 because 8/8.64 = 0.93) and so would have a negative expectation of -7%) and just back all the positive expectation boosts.

I know of two punters who utilise this methodology and who have shared their returns. The first showed his first 100 price boost bets (he has done many hundreds since). After 18 bets he was even, bets 42-80 he was losing and by bet 100 he was making a profit of 6.96%ROI. He calculated this was below the expected value of 9.15% ROI because the average price he took was 5.46 and the average true odds were 5.00. The second punter had made a profit of 4,775 from stakes of 20,059, a whopping 23.8% ROI.

Price Boosts are best found by looking at matched betting sites on facebook where contributors highlight boosts they have found, or, more labour intensively, by scouring the websites of the bookmakers that regularly offer such concessions.

Next week, in part two of Bookmaker Concessions, we'll drill down into the maths of enhanced place terms. There's nothing too complex, but knowing when it is better to bet to standard each way terms and when the enhancement offers value is crucial for win and place players.