Placed Betting – An Untapped Goldmine?

Placed Betting; Can we really make it pay? Absolutely!

But first a very short, but true, story.

Once upon a time. A long, long time ago. The high street bookmakers used to accept ‘Placed only’ bets. But they were losing money! So they sat and they thought. Then they thought some more. Finally they had an idea. “We know”, they said, “lets offer our punters a new bet. Lets call it an ‘Each Way’ bet. The Punters have to place an equal amount of money on both the Win and the Place (whether they want to or not), and then we can get our money back when the horse fails to win, and if it doesn’t even get placed, then we get to keep all their money!”

One of the reasons the bookmakers gave for withdrawing Placed Betting was that it was too complicated to work out the odds. Which is a little strange as these guys are the experts at setting odds. Then they came up with a whole raft of rules for evading the bet. For example in a 16 horse handicap there are 4 place positions, however, if a horse is withdrawn, one of those positions magically disappears leaving only 3 place positions. Do we get our money back? No chance… this happens so regularly that sometimes you wonder if it is not all part of their plan.

The only other ways we could do a Place only bet (until Betfair came along) was the Tote or at the Racecourse. In case you didn’t know the Tote is a lot like the National Lottery. They collect a large pot of money, take out their 30%, and then share what’s left amongst the winning bets. This of course means you have no idea what you will win until after the race.

These days we can do a Place only bet with Betfair. They have separate markets for Win and Place betting. Another thing with Betfair is that the number of Place positions stay constant when horses are withdrawn. Instead of reducing the number of Place positions the odds are reduced by something called a “Reduction Factor”. Horses which are strongly fancied have a high Reduction Factor and least favoured horses have a low Reduction factor. This seems much fairer all round. We still have a good chance of getting a place, albeit at lower odds.

Placed BettingSo how does all this help us? Firstly it means we can use the Draw No Bet strategy on Betfair by having a Win Bet on horse A and a Place (“Cover“) Bet on horse B. Secondly, we can come up with our own staking strategy. For example we could base our staking on the chances (probability) of each horse winning and being placed. Let’s take an example from the 15:05 at Windsor on 29th June 2013. These snapshots were taken about an hour before the off. For more accurate odds you should wait until about 5 minutes before the off.
 

Win Market

 

Place Market

 

In our example lets pick the third favourite Millers Wharf for our Place bet and the Favourite Spiraea for our Win bet. The normal eachway bet would be a level stake on both the win and the place, so let’s try that. £5.00 win on Spiraea and £5.00 Place on Millers Wharf. Lets see what our returns may be (Commission assumed to be 5%):

Bet Horse Stake Odds Gross Return Commission Net Return
Win Spiraea £5.00 4.6 £18.00 -£0.90 £17.10
Place Millers Wharf £5.00 1.83 £4.15 -£0.21 £3.94

I Think you’ll agree the returns are not too shabby. However, the stakes do not really reflect the horses true chances of Winning or being Placed. The stakes seem to assume that both horses have the same chance. Let’s see what the horses actual probabilities are.

To calculate probability we simply divide 100 by the odds. So in our example Spiraea’s true chance of winning is 100/4.6 = 21.74% and Millers Wharf’s true chance of being placed is 100/1.83 = 54.64%. Or to put it another way Millers Wharf has two and half times the chance of being Placed as Spiraea does of Winning. Looking at it this way then our stake should really be biased towards the Placed horse.

To apportion the stakes correctly, we need to use a little formula. It is

Stake A = Total Stake * (probability of A / (probability of A + probability of B))

This looks a little scary but is quite simple with a calculator or a spread sheet. For our example we simply plug in the figures …

Stake for Spiraea = £10.00 * (21.74 / (21.74 + 54.64)) = £2.85

Stake for Millers Wharf = £10.00 – £2.85 (the Stake for Spiraea) = £7.15

So lets see what our potential returns look like using these stakes:

Bet Horse Stake Odds Gross Return Commission Net Return
Win Spiraea £2.85 4.6 £10.26 -£0.51 £9.75
Place Millers Wharf £7.85 1.83 £5.93 -£0.30 £5.64

Not looking as good perhaps as the level stakes returns but a whole lot safer as we have most of our money on the horse with the best chance of succeeding.

I expect you are wondering what happened in this race well Spiraea was unplaced and Millers Wharf managed to get third.

If we would have used level stakes we would have won £3.94 on the Place and lost £5.00 on the Win, making for a total loss of -£1.06.

If we would have staked by probability we would have won £5.64 on the Place and lost £2.85 on the Win, making a small profit of £2.79.

You can make a lot of money Place Betting but you really need to break the mould the Bookmakers have created over the years and look at it in a new light.

Related Content …