The Pros & Cons of Exacta Wagering

As most of my podcast listeners and Facebook followers know, I’m not overly enamored with the tendency of today’s horse players to focus solely on exotic wagers — exactas, trifectas, pick-3’s, etc. I’ve argued that, while these types of wagers certainly provide players a better chance at a “big score,” they don’t always offer the value that most bettors think they do.

Among the stranger reasons for playing exotics that I ever heard, though, came in an e-mail I received several years ago. Here’s what the e-mailer wrote in regard to win betting:

“It doesn't work — period,” he noted. “I tried every way, every method. Betting to win will not work … a losing streak will wipe anyone out … the returns are not high enough.

“Exotics [are] the only way to profit,” he went on, pointing out that his “new goal” was to minimize his bets and maximize his profits.

Sure, buy low, sell high. No problem.

Still, does it really make sense to eschew betting on one horse or one race to bet on multiple horses and/or multiple races, especially when one is concerned about losing streaks? 

Obviously, the short answer is no, although, like most “truths” in the Sport of Kings, there are exceptions. To illustrate both the pros and cons of one particular type of exotic wagering — the exacta (or “exactor” for my Canadian friends) — I looked at an average race at an average American racetrack — the nightcap at Hawthorne on Friday, Dec. 20.

(Click on image to enlarge)

Let’s start with the basics — the takeout rates, which dictate the amounts subtracted from the various pools to fund purses, pay Uncle Sam and otherwise keep the track in business:

HAWTHORNE

Win, place, and show: 17%

Exacta and Daily Double: 20.5%

Trifecta, Pick-3, Pick-4, and Superfecta wagering: 25%

As even the studio audience of the “Jerry Springer Show” can see — after much arguing and swearing, of course — the numbers don’t look great for those betting exactas and daily doubles, and they look even worse for those wagering on tri’s, super’s, pick-3’s and pick-4’s.

Nonetheless, successful speculation is all about finding value. In horseracing, this means insisting on odds greater than one’s actual chance of winning. Luckily, given that horses generally win in accordance with their final odds, we can use the win pool totals to approximate fair exacta payoffs with a reasonable degree of accuracy:

(W)IN HORSE

WIN POOL $ ÷ TOTAL WIN POOL $

(P)LACE HORSE

WIN POOL $ ÷ (TOTAL WIN POOL $ – WINNER’S WIN POOL $)

$1 EXACTA PAYOFF

1 ÷ (W × P ÷ 0.83) – 1

With this in mind, let’s take a gander at Friday’s ninth race from Hawthorne (HAW). Listed below are the win pool totals:

(Click on image to enlarge)

Now, let’s assume that we caught a tiger by the toe and came up with 12-Miles and Miles as the most likely winner and 10-Ideal Alluvial as the probable second-place finisher. What is the fair exacta payoff for that combination, based on the final odds?

Fair Exacta Payoff: 1 ÷ [4,265 ÷ 61,443 × 21,436 ÷ (61,443 – 4,265) ÷ 0.83] – 1 = $31

It’s approximately $31 (see above), which means that the actual $39.90 return was a true overlay, even with the higher exacta pool takeout.

Well, hooray, we’ve just proven that exacta bets can offer (significantly) better value than straight win bets!  

Hold on Sloopy, not so fast. Remember that in this particular scenario we assumed a single bet on a single combination. The minute one starts “spreading,” i.e. wagering on more than one combination, the return on investment (ROI) plummets. For example, let’s say that instead of betting a $1 exacta on the 12-10 combo, we had spread our wagers a bit and plunked down a sawbuck on each combination offering a better-than-fair price.

Below are the fair $1 exacta payoffs (based on the final win odds), with the actual will-pays listed in parenthesis. I’ve highlighted the overlays in green and the underlays in red:

12 with…

1 – Scr.

2 – $881 ($461)

3 – $135 ($113)

4 – $159 ($109)

5 – Scr.

6 – Scr.

7 – $621 ($282)

8 – $62 ($69)

9 – Scr.

10 – $31 ($39)

11 – $104 ($70)

13 – $93 ($68)

What leaps off the page — at least to me — is all the red ink. Six of the eight possible exacta combinations are underlays, which casts doubt on the notion that the exacta is a haven for value. What’s more, if we play the two overlays — 12-8 and 12-10 — the expected payoff is effectively cut in half. And, no, this does not change if the dollar amounts are raised (provided the distribution of money bet remains unchanged).

As you might imagine, spreading is even more pronounced in multi-race sequences. According to an old Facebook poll I conducted, horseplayers (at least the ones that took part in my survey) generally use about 12 unique contenders in a typical Pick-3 bet.

Ironically, the one thing that exotic betting has going for it is a lower hit rate. Let me explain: Although most gamblers don’t think about it, sports betting in almost all its forms is the ultimate exercise in socialism, whereby the haves pay for the have-nots. This is because the “tax,” i.e. the takeout (or vigorish), is paid solely by the winners.

A horseplayer that loses a $10 bet does not fork out an additional 15-20 percent to cover the takeout; instead, the designated percentage, including breakage (in horseracing), is deducted from the winning payouts. Hence, less winning equals less takeout paid. I realize this is a pyrrhic victory if there ever was one, but it does illustrate why grinding it out can be so difficult for the average player to do.

So what does all this prove? Only that it pays — quite literally — to treat every wager with care. Understand that higher returns don’t necessarily imply greater value and that the more money you churn, the more it costs you in the form of takeout and breakage.

If you want to become a better bettor, keep records, assess your strengths and weaknesses and, for heaven’s sake, make the necessary changes. If you can’t cash an exacta to save your life, quit trying — at least with real money — until your skills improve. If every time you play the Pick-3, two of your top choices win and you collect zip, stop playing the Pick-3! Try betting your primary contenders to win or to place; do something, anything, other than what you’ve already proven doesn’t work for you.

Above all, pay heed to the words of Thomas Tusser, who said: “A fool and his money are soon parted.” Try to remember that the next time you’re at the racetrack… or when buying a Rolex from a guy in a trench coat. Life is short. According to my new watch, there are 10 hours in every day — spend them wisely.