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Old 06-15-2018, 11:22 PM   #1
mick
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Terminology - Overlays vs Underlays

I've always found the terms "overlay" and "underlay" interesting. In our pari-mutuel world of American betting, they are somewhat obscure. If we were in Great Britain or even New Jersey, with bookmakers or betting exchanges, however, the terms would be easier to understand.

Assume we are at Ascot and a bookmaker's line is 5-1 on Tennessee Stud. In other words, he's offering or "laying" out those odds to all takers. Further assume that I think 5-1 on Tennessee Stud is a good bet. (Of course, with that name, I'm somewhat prejudiced.) So, I "take" the bet at 5-1. Thus the terms "laying" and "taking" a bet. It's another way of saying offering and accepting a proposition.

Viewed monetarily, the bookmaker is willing to risk 5 of his dollars for 1 of mine that the horse loses. On the flip side, I'm willing to risk 1 of my dollars for 5 of his that the horse wins.

And that brings us to the terms "overlay" and "underlay." If I think the horse's fair odds are 3-1, then the bookmaker's odds are OVER my estimation. So, Tennessee Stud is an overlay at 5-1.

If instead the bookmaker's odds on the horse are 2-1, that would be UNDER my estimation of fair odds and Tennessee Stud would be an "underlay."

And yes, there was a Tennessee Stud according to Johnny Cash, although I doubt he raced at Ascot.
https://www.youtube.com/watch?v=b_X_SWuwM7k
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Old 06-15-2018, 11:44 PM   #2
mick
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And then there's Doc Watson's version.
https://www.youtube.com/watch?v=dq-1G6Wif8s
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Old 06-16-2018, 07:46 AM   #3
Mitch44
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Old timers were brought up on those terms Mick. Todays they have been replaced in what I believe to be a false narrative. By that, today all you hear is the word value. I deem the word value to be a false narrative and a fools errand because the mind accepts this to be the way to go or way to profit. Where as the word overlay denotes a true win contender that the public is overlooking.


Odds / value is meaningless if the horse isn't a true contender, handicappers far too often accept todays vogue word of value. Value like beauty is in the eye of the beholder without much factual data to back it up.


All longshots are not created equal and in essence one 15-1 can be an overlay while another can have value at 15-1. One has merit while all the other has going for it are odds. Note: the amount of the odds really aren't what determines either one as a 3-1 shot can be an overlay based on the competition within the race and its advantage and strength over the field. The horse's capability must be determined than it has to be put in context among the competition within the race itself.

Overlay has always meant a valid true contender that the crowd or public for some reason is not betting in proportion to its real chances. Value is fools gold that tricks or misdirects the mind to something that's truly not there.
Far too often this is seen when handicappers get the race down to 4 horses and always bet the two highest odds horses. Now not all 4 horses equally can win the race. A handicapper must learn to take what the public gives them and if the two best horses odds are to low than pass the race or make what you can out of with an EX or a DD. Size of the field helps to get better prices and the biggest reason is mistakes of the publics assessment of the race.


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Old 06-16-2018, 12:49 PM   #4
Bill V.
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Thanks

Nice interesting topic Mick.

I learned something. I never understood what those terms

Best skill

Bill

P.S

Hey Mitch
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Old 06-17-2018, 06:17 PM   #5
Mitch44
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I wrote this on 27 Jan. 2015:




The fallacy of value.


Horseplayers have locked into what today is defined as value because of a proliferation of shorter priced horses brought about by the computer era. The very word value concocts a notion of big money and longshots through a subconscious power of suggestion. Players who drink this Kool-Aid are destined for failure.


What players don’t realize is that like favorites all longshots aren’t created equal. Just like false favorites there are false longshots. It not the odds that make a horse a winner but rather weather it’s a viable contender as determined by your handicapping.


In the 60’s 70’s Burton P. Fabricand, Ph.D. wrote two books about horseracing titled: Horse Sense 1965 & The Science of Winning 1979 which by the way are still available through Amazon. I’ll save you some money here as the gist of his writings is that he conducted mathematical studies and found or verified that horses win in proportion to their odds. In other words there are more 9-1 horses that win as compared to 15-1 horses. Even favorites in that the lower the favorites the more likely the horse is to win. I.e. there are more $ 3.20 winners than $4.80. Bookmakers have known this fact for years and as they took bets would adjust their odds to create better odds on others to entice more action to balance their books. Note: see the chart below.


Table converts win odds into a horse's actual percentagechance to win the race.


Win Odds
Win %
Win Odds
Win %
1/10
90.91
4/1
20.00
1/5
83.33
9/2
18.19
2/5
71.42
5/1
16.67
1/2
66.67
6/1
14.29
3/5
62.50
7/1
12.50
4/5
55.56
8/1
11.11
1/1
50.00
9/1
10.00
6/5
45.45
10/1
9.09
7/5
41.67
11/1
8.33
3/2
40.00
12/1
7.69
8/5
38.46
15/1
6.25
9/5
35.71
20/1
4.76
2/1
33.33
25/1
3.85
5/2
28.57
30/1
3.23
3/1
25.00
50/1
1.96
7/2
22.22
99/1
1.00








What this chart says is that if you bet 10-1 horses you’lllose 91.91 or 91% of the races you play and win 9. As you can see the higher the odds the less likely a horse will win.


The word value should be replaced by the word overlay because an overlay is determined by your handicapping not an arbitrary odds or the chasing of fool’s gold. You better have some good reasons for betting a 10-1 horse such as having in your top three contenders. Yesterday on 26 Jan. 15 the 6th at FG paid $26.80 , Lt1, Appy and I all had it and none of us talked before the race but we all had it in our top 3. Now that’s an overlay and not a value horse. The horse also keyed a nice DD of $109.Overlay yes, value no.


Sadly the worst drinkers of the value Kool-Aid seem to be Black Magic users who forgo handicapping and zero in on value because their mind steers them to value / odds rather than overlays as they pursue their instant gratification. Like a drug once their hooked the hole is so deep they can’t get out but more importantly they have become condition to a behavior that enhances failure. The cure is quit the insanity while honing your skills and change your mindset. In the 60’s I read a book titled Psycho-Cybernetics which the gist of it is to steer one’smind toward something which actually works. Athlete’s latched onto this and used its concepts to train by visualizing their performance. i.e. Batting abaseball visually was just as effective as actually doing it.


Jimmy “The Hat” Bradshaw was so good at picking winners, I told him; “You must be killing exactas.” to which he replied; “No Mitch for some reason the racing Gods don’t let me win exactas as I get a lot of first and thirds with them.” Later in talking to him he was so proud that he was doing so good with rolling DD and P-3 that came into vogue. Bottom line is to play to your strengths and take what a race will give you and let the public make the mistakes.


Galen G. Mitchell
AKA Mitch44








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Old 06-17-2018, 08:36 PM   #6
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This is an important concept. In fact, I would argue that it is the most important concept to actually winning in any gambling game where the bettor can achieve a positive expectancy. Most call this +EV = the odds offered on your bet(s) exceed the probability of the outcome(s). In certain casino games such as blackjack, the probabilities are objective and can be precisely calculated. In other games such as horse racing and sports betting, the probabilities are subjective, and it is the skill of the player to estimate these probabilities and compare them with odds offered. When the odds offered exceed the estimated probabilities, you have an "edge" (+EV) and you should bet. Betting your edge divided by the odds (Kelly betting) will maximize the growth of your bankroll, but due to various uncertainties involved, most will bet some fraction of Kelly. Too complicated, you say? Guess what, in a parimutuel pool you are betting against other (big and smart) players who are doing just that, so you are at a huge disadvantage if you are not using this approach.

Now, let's make this even more complicated. Horse racing betting pools have bettors who may have some sort of "inside" or superior information, either positive or negative. Don't be naive, It happens and will show up in the odds. For this reason, most professionals not only make an estimate of a bet's probability of winning, but also make an estimate of what odds they EXPECT to see. Expected overlays create +EV. Unexpected overlays are what Mitch44 is referring to as "fools gold", and are NOT +EV. In fact, guys like Bill Benter actually incorporate the tote odds into their probability estimates (I believe he weights the board 50%).

Bottom line, horse racing is a betting game. It is all about bet structure against others with similar or possible superior knowledge. Every bet needs to be +EV, or it should not be made.

Richard
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Old 06-19-2018, 01:19 PM   #7
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Coming up with accurate probabilities for proper weighting is huge. Even within RDSS the same factor isn't and couldn't possible receive the same weight or probably percent across all distances, surfaces etc. as it importance changes based on the conditions.

For me its more of a feel as to who's best or how close they are and what the public is giving you. Now its even harder because you can't see what the public is giving you, make you're bet only to find out after the race starts the odds drop on you're horse. Comes from more Benter's out there now that his methods have been out in the public domain. Plus intertrack wagering and that last minute money coming in.

I have always found the Kelly hard to employ especially with playing multiple tracks etc. Its much easier to employ after a 20 race cycle than on a race by race basis. Sure the profit will be slightly less but its still more effective that not employing it at all. Actually it has a flip side that in some cycles it can save you money. I love it based on 20 race cycles or on bankroll balance where you have the time to keep up with it. Impossible when you have two races going off close together and the results are yet unknown in one of them. I prefer to employ it after 20 race cycles.
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Old 06-19-2018, 01:27 PM   #8
Bill V.
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Thank you Richard

Quote:
Every bet needs to be +EV, or it should not be made.
Richard are you coming to Saratoga for the Pace and Cap gathering

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Old 06-19-2018, 07:40 PM   #9
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Hi Bill:

Yes, I am planning to come to Saratoga for the Pace and Cap gathering...see you there!

Richard
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Old 06-20-2018, 11:36 AM   #10
Brian Chamberlain
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Hi Mitch44, I don't understand your distaste for Black Magic. I know Michael Pizzolla can rub folks the wrong way, he is a NY lawyer after all. But his software is good though very expensive. Years ago I went to one of his seminars and he analyzed races BEFORE the card stated and was quite impressive with results. You're right: it is not just value, the horses should be legitimate contenders. We're just trying to identify horses the public has missed that should have been bet down. At least that's what I do with Ted's fine RDSS2.1 software. I am not a Black Magic user, this is just a hobby for me, Ted's work is excellent. Just my 2 cents, Brian
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