In some sports, the average Joe or Jane could make a decent fist of being a bookmaker – we may instinctively know who is going to win a football game or a tennis match…. or we might think we do, at least.
But in horse racing, the process is much more complicated – it becomes a question of mathematics and science, rather than just mere gut feel. That perhaps explains why the bookies are so keen to employ the sharpest minds in their trading divisions.
So how do bookmakers set their horse racing betting odds? Is it simply a question of using the quality of the horse, its jockey and its trainer as the guiding principle, or are there other factors at play?
The first show
There are, essentially, two things that determine horse racing odds: the bookmakers’ first show, and then the weight of market money.
When you load up Horse Race Site, for example, to browse the card for a particular meeting, you will see the odds that are ‘correct’ at that exact moment – a snapshot in time.
The first show is where the bookies’ analysts earn their corn – they set the opening odds based on several factors, which we will explore in more detail shortly.
And then, as time passes, the betting public will begin to have their say. The weather conditions may change, favoring one horse more than others, or there may be a change in market sentiment – sometimes, when a particular jockey or trainer is having success at a meeting, the odds on their horses running later will shorten accordingly.
The weight of public money will move the lines once more, and bookmakers are constantly scrutinizing how to balance their market by shortening fancied runners and lengthening those unsupported by punters – they are, after all, trying to protect their profit margin like any other business.
It’s not always possible and the bookies do lose from time to time, but there’s a reason why so many of these firms are global, billion-dollar enterprises.
How do bookmakers set their odds?
For their opening show, the bookies have one objective in mind – presenting a set of odds that protects them from suffering a huge loss.
If they underprice a favorite, for example, and bettors pile in, suddenly the bookmaker is facing a huge liability – even after shortening their prices, it might be too late.
So most bookies set their opening odds in a conservative way, and they protect themselves further by building an overround – also known as ‘vig’ or juice – into their prices. Let’s think about the toss of a fair coin: there are two possible outcomes, either heads or tails, and so a bookie should, in theory, offer even money on both to represent probability fairly.
But instead, the bookies would price heads and tails as something like -100 each. Why? Because that way, they profit no matter which side is wagered upon.
The traders at a betting firm will then set to work. They have access to a range of tools, including videos of previous races, software that tracks split speeds and times and their own in-house handicapping systems, which consider race distance, prior form and even the inclement weather conditions to create a set of odds for a particular race…. accounting for the vig, as already mentioned.
In the end, a horse race will have odds available that reflect each runner’s chance of winning, and once those are set live, the market will be consistently monitored and altered based upon the weight of money and public sentiment.