Value and Odds 8 minutes

An understanding of betting markets and some basic mathematical concepts that relate to betting is essential for every punter.

In this article we take a look at some of those concepts and how that knowledge is relevant to helping you make good betting decisions.

The Betting Market

Market Price – Winning Chance

All punters are familiar with the concept that the price of a horse determines how much money you get back per $1 bet. For example, if you have a $20 win bet on a horse at a fixed price of $5 and the horse wins, you are returned $100 ($20 x $5)… for a profit of $80.

However the price of a horse also has another very important meaning. It reflects the market’s opinion on the winning chance of that horse in the race.

The easy way to approximate the winning chance of a horse is to take 100 and divide it by the market price. For example:

  • A horse that is $1.80 in the market has a 100 / 1.8 = 55.55% chance of winning
  • A horse that is $2.20 in the market has a 100 / 2.2 = 45.45% chance of winning
  • A horse that is $5.00 in the market has a 100 / 5 = 20% chance of winning
  • A horse that is $11 in the market has a 100 / 11 = 9.1% chance of winning
  • A horse that is $26 in the market has a 100 / 26 = 3.85% chance of winning

Close to jump time the total BF Exchange market is very close to 100% (see below for an explanation of market percentage) so the prices provide a direct indication of the markets opinion on winning chances.

Bookmaker fixed odds market add up to much greater than 100% (usually 115% or more) so a direct calculation using the method above will slightly overestimate the winning chance of each horse (the longer the price of the horse the greater the gap.)

What is Market Percentage?

Market percentage is simply the sum of the winning chance calculated for each horse in the race (using the above method.)  The table below shows a theoretical eight horse fixed odds bookmaker market sorted from highest winning chance to the lowest winning chance. Against each market price you can see the % winning chance and how much you would need to bet on that horse to collect $100

Market Price – Losing Chance

Using the equation above we can also determine the losing chance of a horse and effective market price for that.

For example: If a horse is $5.00 in the market it has a 100 / 5 = 20% chance of winning.

That means the horse has an 80% chance of losing.

If you do the calculation 100 / losing % chance then this gives you the effective price about the horse losing. Using the above example 100 / 80 = 1.25

So a horse that is $5.00 to win (20% win chance) is a $1.25 chance to lose (80% losing chance)

If you are laying a horse at $5.00 then you are effectively taking a price of $1.25 for any other horse to win the race.


There are a few things to note about market percentage and this example:

  • The total of all winning chances as expressed by this market is 115.4%. Another way to look at it is to see that if you backed every horse to collect $100, you would need to outlay $115.4… obviously a losing bet.  If market percentages were less than 100% it would mean punters could back every horse in the market and make a profit, regardless of who the winner was.
  • The higher the market percentage the greater the average gap between each horses expressed chance of winning and their actual chance of winning. Sometimes you will hear or read about punters complaining about high market percentages and that’s because they provide a greater advantage to bookmakers.
  • Conversely, the lower the market percentage the closer each horse is on average to its true winning chance and the better it is for punters. This is one reason why the Exchange market can be benefit for punters. The overall market percentage (even after winning commission) is typically much lower than fixed odds markets.

What is Value?

Value is the term used to describe the relationship between a horse’s winning chance expressed by the betting market and its real winning chance.

  • Good value means the horse’s market price is greater than its real chance of winning (often referred to as “over the odds.”) For example, a horse at $2.80 in the market (implied 35.7% chance of winning) that is actually a 40% chance of winning (implied $2.50 market price), is considered good value. $2.80 is considered “over the odds” as the correct price should be $2.50.
  • Poor value means the horse’s market price is less than its real chance of winning (often referred to as “under the odds.”) For example, a horse at $3.00 in the market (implied 33.3% chance of winning) that is actually a 28.6% chance of winning (implied $3.50 price), is considered poor value. $3.00 is considered to be “under the odds” as the correct price should be $3.50.

Of course the “actual winning chance” of a horse is very much a subjective concept. What one punter views as good value will be viewed as poor value by another punter. It’s only through a very large sample of bets or assessments that you can start to ascertain whether your overall judgement about value is correct or at least sufficient enough to show a profit.

Profiting from Good and Bad Value

The benefit of the Betfair Exchange is that it gives you the opportunity to profit from horses you have a strong opinion on, whether it be that a horse is good value or particularly poor value.

Horses that are good value (i.e. available at a better price than their real winning chance) are targets to BACK.

For example a horse that has a 40% chance of winning (implied correct price of 100 / 40 = $2.50) that is available in the market at $3.00 is providing a value edge of (40 x 3.0) = 120 – 100 = 20%. In the long-term you would make 20% profit on turnover betting in this scenario, less commission (assuming your judgement is correct.)

Horses you believe that are poor value and under their real price are good targets to LAY, providing you can lay them at the right price.

For example a horse that in your opinion has a 30% chance of winning (implied correct price of 100 / 30 = $3.33) that is available to lay at $2.50 has a value edge of 25% in your favour. In the long-term you would make 25% profit on total bets held (less commission).

Betting is all about Probability

As a punter it’s important to view betting on racing or any other event as a battle of probability. There are no absolutes such as “this horse has no chance” or “this horse is guaranteed to get a perfect run” etc. Everything has a probability or certain percentage chance of occurring.

The key to successful betting is to find opportunities where the probability of winning expressed by the market is different to what you believe the real probability is. When it comes to betting on the BF Exchange that can mean finding horses that betting market has underestimated, which are good BACK opportunities, or horses the betting market is overestimating, which present as good LAY prospects.

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