[mrtomk]

Hello All,

Just a quick question from a relative newbie.

I have placed a bet on a horse/team at a certain price, this price then proceeds to drift in the build up to the start/kick-off time. Is there a process to decide at what point, if ever, the new, higher price becomes such that we should increase our stake in the horse/team?

This happened to me today whilst betting on a UK horse race. A price on BetFair drifted out to 9.5 (decimal odds), when I had previously backed it at 7.2 (whilst it had been around 5.5 with other major UK books).

If a line can be estimated and compared to those put out by the books, how do we adjust our betting strategy once an initial wager has been made?

Sorry if this is obvious or a question that has been asked previously. Is there a specific term for this as I could not find anything in a search.

Many Thanks

[brettd]

Hey Tom,
In general the market moves inexorably towards efficiency as it gets closer and closer to the event's start time. Information gets absorbed and eventually gets factored into the price. If the closing price has moved against you (and a drift from 7.2 to 9.5 is a big move, especially the highly liquid UK horse racing markets on Betfair), chances are the bet at 7.20 was -EV to begin with.

Now that's not to say a move to 9.50 always reflects the horse's true chances. The market may have overcompensated, and the break even EV after Betfair's commission may be 9.00, to give you an EV of 50c in every dollar. But this is more unlikely than it is that you just made a bad bet.

Record your bet, and the price you took it at. Record the price the bet is going for at the off. If you aren't beating the closing price by at least 5% on average (the size of Betfair's commission, or whatever your commission rate is), you aren't breaking even in the long term.

Cheers, Brett

[mrtomk]

Hi Brett,

Thanks for the feedback. So we can assume that, in almost all instances, by the off the betfair market will have reached maximum efficiency? Therefore, regardless of the races outcome, a price taken that is higher than the starting price will be +ev, and lower will be -ev (accounting for 5% commission)?

Effectively, if we assume the prices at the off account for all information available, and represent a fair evaluation of the horses chances, does this mean that betting at the starting price will always be -ve after commission? And that any value that is to be had exists when the markets first open, and when liquidity is at its lowest?

Thanks again for your help
Tom

[brettd]

So we can assume that, in almost all instances, by the off the betfair market will have reached maximum efficiency?

Yes. In general, the market will be the most efficient it has been by the off. I wouldn't call it 'maximum efficiency', as this conjures up images of the market as some sort of well-oiled EV neutralizing machine, relentlessly grinding every betting event down to a point where no one wins but the house's juice. This is not the case. The best cases being 'big square' events, such as the Melbourne Cup here in Australia, or something like the St Leger up over your way. Normal efficiency mechanisms are distorted by the books having to control their liability against large amounts of public money in these instances.

Therefore, regardless of the races outcome, a price taken that is higher than the starting price will be +ev, and lower will be -ev (accounting for 5% commission)?

Generally, yes. However, you could have a scenario where theoretically, a horse's true chance should be say, 1.90. The SP has it at 1.60, and you manage to get on at 1.80 (both prices adjusted for commission). You theoretical EV is still -10c in the dollar. But how do we know this 'true chance' of winning? We don't. You would still count this as a +EV bet. However, we still need some sort of gauge on how we are doing, and beating the closing price by at least the commission rate remains the best gauge there is.

Effectively, if we assume the prices at the off account for all information available, and represent a fair evaluation of the horses chances, does this mean that betting at the starting price will always be -ve after commission?

No not quite, if you picked up a bet at the SP at 3.00, and the market drops to 2.40 by the off, you've picked off some +EV when it was still there at the SP. You need to make the judgement call at the SP as to whether you can pick off value then, and whether picking off value at the SP optimizes your EV on a bet when taking into account all other possible bet timings prior to the off.

And that any value that is to be had exists when the markets first open, and when liquidity is at its lowest?

This is a complicated question. You need to think about a couple of things that affect your betting decision concurrently:

1. The market over round early in the market's existence may not be as low as it would be at the off. You could be betting into an over round of 107% at time x, but the market closer to the off is 102%. You avoid paying a 'market structural' juice of 7% (when you only have to 'pay' 2% later on), in addition to the commission you would pay if you'd won the bet. But again, waiting for the market to populate and go down to 102% could be to your detriment.

2. The market's liquidity and your betting volume requirements factor in the timing of your bet. Commission adjusted break even EV on horse x is 7.20. There may be only $2k of action at 8.00 at time y, whereas 30 minutes later, there may be $18K of action at 7.40.

Hopefully that helped.

Cheers, Brett.

[mrtomk]

Thanks Brett, this is really enlightening stuff for me, and reassuring given a recent losing streak on what I can now better confirm as +ev bets. Funny that the -ev bet mentioned in the OP was my only recent winner...

Many thanks again