Overlays
- By
Charles Carroll
There are two extremes in overlays and underlays that you
need to be aware of, while youre busy avoiding more typical underlays
and fair odds, as discussed last week. One is the true low odds
overlaythe other is the high-odds underlay. The way to
understand when you are facing either one (as well as the more
conventional mid-range overlay) is to first, of course, understand your
own handicapping, and second, understand how the crowd handicaps.
All of us love the $42 horse. We may have long-since
forgotten individual $50 exactas, but well remember the time we saw
the hidden potential of a horse that the crowd placed at 20 to 1and we
were right; they were wrong. For probably the majority of
handicappers, when they truly handicap a $42 horse (as opposed to
taking a long-shot flyer) the money is nicebut secondary. It is
validation of everything we do. The crowd saw this horse as a 20
to 1 shot, which means they gave it only a 4.76 percent chance of
winning. Conversely, a 95.24% probability of losing. We
saw beyond that, understood the race better, and gave it, say, a 3 to 1
(25%) chance of winningand took the bet.
So does this mean if you like a horse and its on the board
at 20 to 1, you take the roll out of your sock? Only if you want
to be selling popcorn in the fall. The only way to evaluate what
the crowd is offering for odds is to make an odds line yourself.
Liking a horse has no value in value betting unless you know
exactly how much you like it. That involves both your own
handicapping and skill, and making an odds line from it (see Part 1 of
this series). But just as importantly, it involves
understanding what is shaping the crowds odds on this race.
The smaller the difference between your odds and the crowds
odds, the less there is to understand. If you are handicapping a
routine race that fits your methods, and you make the Win contenders 3
to 1, 4 to 1, and 5 to 1, while the crowd reverses those odds, there
can be a myriad of reasonsbut they are probably ones you can readily
see: A Beyer Figure that they buy and you dont; a layoff that
you see as positive and they see as negative. You size up the
race differently and you can bet your 3 to 1 horse at their 5 to 1
offer, or work a strategy on an exotic with routine confidence.
Suppose, however, that this is the $42 horse. The crowd
makes it 20 to 1 with all the above statistics. If this is a
nine-horse race and you make this horse 15 to 1 and the crowd is
offering 20 to 1, is that an overlay? No. You are giving
this horse a less than random chance of winning, and it is not an
overlay at any price (see Part 1 of this series). Now, suppose
this horse is your third choice in the race and you make it the 5 to 1
horse among the three contenders above. Is it an overlay for a
major Win bet? Some advocates of value betting would say,
Yes. I have seen it argued on a purely statistical basis that
if your 5 to 1 horses win their fair share of races (16.67%), and
if your first two choices are standing at fair odds or underlays
indicating no value available from them, then pound your third choice
for the percentage angle.
Theres only one little problem here. If I give a horse
a 16.67% chance of winning a race and it is my top pick as I
understand this race, then chances are it will win something around
that percentage of the time. However, if I give a horse that same
percentage chance to win but give two other horses better chanceswhich
the crowd agrees with and is heartily betting them into underlay
rangethen that third choice of mine is probably not going to
win its projected 16.67% share. It might not be a Win Contender
at all, but a Money Contender. (Next week Ill expand on the
three types of contenders.)
A third-choice, percentage-angle overlay, for a good
handicapper, is usually a rotten Win bet. As with random odds,
you are betting against your own skill. Just because the public
odds on a horse are higher than your odds, does not necessarily make it
an overlayand just because you make a horse an in-the-money contender
does not mean it would actually win this race in this lifetime.
So how do you spot an overlay and how do you avoid some of
the pitfalls of false overlays that are even touted in the
literature? Again, the first element is to understand and trust
your own handicapping. Your own handicapping forms the baseline
for comparison with the public odds.
If you have followed this column, by now you have probably
noticed I have hardly written a word about handicapping, per se.
That is because I believe that virtually anyone (with a few
exceptions) can learn to handicap. Handicapping is
fun. Its work, but its fun. The only individuals whom I
have seen fail to become good handicappers are those who refuse to
believe that it requires work. Whether you use speed, pace,
trips, class, or all of the above, you can learn to be a good
handicapper. Where good handicappers fail to become successful
bettors is in the conversion of the results of handicapping into
betting strategies and, as mentioned in some earlier column, this
is NOT money management.
The vast majority of players do not play from a bankrollthey
play, as Eric Langjahr says, "percent-of-pocket," so pontificating
about units, etc. is meaningless. For good handicappers,
whether they are large or small bettors, the trick is to turn the
results of their handicapping skills into well-designed bets.
These days, there is a nice array of potential bets at most tracks that
let you shape bets based on your results. (If you want to date
yourself as a geezer, recall naked races, when track officials seemed
to think that exotic somehow implied immoral, and tried to protect
us from ourselves.) Contrarian handicapping takes all this into
a new realm which I really enjoy, but for now well only worry about
conventional handicapping.
Handicappers who think only in terms of Win Contenders are
not only limiting themselves to just one area of potential profit (Win
overlays), but are also exposing themselves to a wider array of
pitfalls than if they understand and play the full variety of overlays
available. Once you have handicapped a race and believe you
understand it, in terms of Win Contenders, Money Contenders, and
Non-Contendersthen overlays become possible in all pools. Some
are harder than others to identify, and well talk about some,
including my favorite, the Place Overlay, in the future. In all
cases, in addition to the conventional overlay (you say 3 to 1, they
say 7 to 1and you know why), its good to be on the lookout for
the two oddities described at the beginning: the low-price
overlay and the high-odds underlay. One makes money; the other
loses it (remember the little edge equation in the very first article
in this series).
Without getting too personal here, its no secret that I had
some pretty good alternative speed figures before the Beyer Figures
were published. I also had the advantage of working at tracks
that had one of the mostshall we say naivepublics in the
nation. As a result, I became spoiled rotten by the odds
I was given. If I didnt get 12 to 1 on a dead-nuts, sure-thing,
third-place finisher who had my figures in the 960s in ten
consecutive races and was going to crush a field of winners who had
never broken 900, I would pout and pass the race. Im not
kidding. So when the Beyer Figures became the single most
important factor in setting the public odds and I started getting 4 to
1 on horses I made 3 to 1, I entered a sort of personal dark ages. I would
go to the track or OTB andeven though I am his biggest fanI would
pass races and pout and cuss Andy, or worsemake dumb bets, trying to
wring some odds out of exoticsall because the public now had access to
some pretty decent speed figures.
What finally broke this pattern was accepting the existence
of low-priced overlays. In my own work, I now use what I call
aggressive odds and print out for myself on paper what 50% and even
25% overlays should be. Now, if I go to the track and my favorite
Win Contender is down to 3 to 1 at post time, I dont necessarily tear
my computer printout into confetti and toss it in the air. With
an aggressive odds line that more closely tracks the piling on factor
of the crowd, I may very well have that horse at 9 to 5, and can just
shrug and say, OK, fine, 3 to 1 overlay, and pound it with a total
lack of guilt. And guess what? In total accord with
every theory, statistic, and mathematical formulae, horses in these
low-odd ranges do tend to come in more than horses set at higher odds.
I always knew that; I just never capitalized on it
because of old-fashioned handicapping ego. I doubt that anyone
else could be that dumb, but if any of this sounds familiar, start
paying attention to low-priced overlays.
The flip-side are high-priced underlays. These are not
the $42 horses that we all dearly love to handicap and ID. These
are the $42 phonies. How do you tell the brilliant score from the
phoney? Well, for one thing, because of the percentage range
were working in here, you are not going to be able to do it as often
as you will with lower priced horses. Thats a truism that we all
sort of know, but hate to really accept. If you are a
Contrarian handicapper, you are probably playing in this zone a lot
and you, no doubt, have your own theories. In this range of
oddssay above 8 to 1the increments between steps get much
smaller. Take a look at an odds table (one is posted in the
article library of iCapper).
Note that the probability of winning of an 8 to 1 horse is
11.11%. A 10 to 1 horse is 9.09%. A significant difference,
but not huge, given that the odds step is only two. Now look down
the list. 15 to1 is 6.25%, 20 to 1 is 4.76%, and 25 to 1 is
3.85%. The odds begin to skyrocket with very small increments of
change in the win probability.
They can also come down in very big chunks based on very
little action, especially at small tracks. I once dropped the
odds on a dog from 99 to 1 to 17 to 1 with a $2 Win bet at the Juarez
Greyhound track. So, a drop from 30 to 1, to 15 to 1 does not
necessarily mean the smart money has arrived.
As noted last week, NOBODY knows what the true odds are until
the race is finished. There is interplay between the odds of all
the horses entered and, once the odds leave the primary contenders of
the race, there are many factors causing bets to be made other than a
burning conviction that these low-interest horses are going to
win. The higher the odds, the less exact both the odds and the
reasons become.
You can make up complicated scenarios and rules, or you can
depend upon one simple test. If you are making a horse 3 to 1 and
the crowd is making it 20 to 1, and you know the reason why,
you may very well have a true $42 horse. However, if you run
across a horse that you are making a contender at relatively low odds
and it is standing at 20 to 1and you dont know whythen,
whether it is a true overlay or not is purely academic. It may be
somebodys overlaybut not yours. Next race.
