Bet Optimization

Everybody (except Bono) that has attempted to profit in any speculative venture — whether its gridiron gambling, playing the ponies or investing in real estate or the stock market — knows that, in order to be successful, one must only wager/invest when the known return(s) exceeds the perceived risk(s). In horseracing circles, this is known as “value betting.”

It sounds simple. And the majority of literature on the subject seems to imply that value betting is only slightly more difficult than withdrawing money from an ATM machine or explaining the plot of those insipid “Transformers” movies (hot cars, hotter girls and lots of explosions… oh, and some Nazis running about). Of course, if this were truly the case, my local racetrack parking lot would be packed with Corvettes and Ferraris rather than that rusted VW Rabbit with the duct tape trim that I always see while trying to find a spot for my custom import (a chromed out 1985 Yugo).

The sad truth is the ability to detect value and bet accordingly is one of the most difficult aspects of successful wagering. Contrary to what you may have heard, the sports betting crowd is one of the most informed, best educated around. True, the Kentucky Derby infield would seem to argue against this, but ask your average regular bettor about their sport of choice and most of them will be able to give you highly-detailed information and a persuasive rationale for betting for or against a particular team or individual contestant.

Now, compare this to the average person with a stock portfolio. During the market boom of the 1990s, many “investors” knew little more than the ticker symbols of the companies whose stocks they were so enthusiastically trading.

Frankly, finding overlays in sporting events is difficult precisely because there is so much information available to bettors — and the bettors use it. As a result, sports betting markets tend to be fairly efficient. The fact that such-and-such pitcher is 7-1 against teams from the American League West when playing at night in a domed stadium is accounted for (and summarily dismissed if found to be irrelevant). Exclusive information is hard to come by and even harder to profit by, as it invariably has a very short shelf life.

So how does one find the elusive overlay? Well, not surprisingly, it takes a lot of time and a lot of record-keeping (that giant splash some of you just heard is the sound of half my readers — three people and a trained chimp — jumping ship). Yeah, I know it’s not fun, but to be a successful speculator one must determine his/her rate of success — or lack thereof — under a variety of different circumstances.

It helps to first make a line. To do this, simply start rating your selections. In pari-mutuel events such as horse racing, it’s best to grade as many contenders as possible. However, don’t feel compelled to assess every entrant. If you don’t know what rating to assign the first-time starter with the nondescript workouts, don’t bother. Consider the horse an “unknown” and move on. The idea is to find your acumen in events and on competitors that offer a basis for making an informed decision. Let’s face it, in some contests, for some people, no such basis exists.

How you rate each team or entrant is up to you. You can use a number, stars, check marks, etc. Once again, the greater the range of possible ratings, the better. After this has been done, begin recording the results. How do your best plays fare? At what odds do they typically win? How about your second choice? Your third choice? The unknowns?

Keep your results as detailed as possible. The goal is to find out whether or not your plays are profitable, at what price, and under what conditions. To some, this may be discouraging as they may find that their selections aren't profitable at any odds, under any circumstances. If this is the case, don't fret. It is better to learn such lessons on paper rather than in the unforgiving atmosphere of a racetrack or a sports book. Use the information to become a better handicapper. Why are you losing? Set up hypothetical betting situations and track the results. Perhaps you are putting too much emphasis on speed ratings or class distinctions or running style. Ask yourself what rating you would assign if you ignored these factors.

Whether you are winning or losing, you should always try to improve your play. You might be surprised at the strengths and weaknesses you can uncover by analyzing your performance in this manner. Now, once you have a fair amount of results to study (at least 100 events, but preferably many, many more), the real work begins… to be continued.