variance, vince accardi, winning on the punt

Winning on the punt requires two things:

  1. Knowing the chance your selection will win; and
  2. Getting a better price than you should. We’ll start with the latter first.
Winning on the punt: The importance of price

Here is a table with some examples of different bet prices when you bet on heads in a coin flip:

Rated Price Chance of Win Bet Price EV / POT / % Overs
$2.00 50.0% $1.90 -5.0%
$2.00 50.0% $2.00 0%
$2.00 50.0% $2.10 5.0%
$2.00 50.0% $2.20 10.0%
$2.00 50.0% $2.30 15.0%

 

To learn how I calculated the EV, PoT and % Overs column, see my last article here.

I’ve written several articles about the importance of price and getting the best odds. This table shows another example of why getting the best price you can is so important. A measly $0.10c increase from $2.10 to $2.20 doubles your profit in the long-term. Crazy but true. You can see how it plays such a big part in winning on the punt.

In this example, the rated price or “fair price” is $2.00. Any price greater than $2.00 is a better price than what you should get. And even though the bet may lose, that’s how you’ll make a profit in the long-term. The better the price, the more profit you will make.

Winning on the punt: Calculating chance

Backing your selection at the best price you can is the easy part. The tough part – the part that separates pro punters from average punters – is accurately determining the chance that your selection will win. The chance of heads in a coin flip is easy (50%). But what’s the chance of Richmond beating Carlton, or Nature Strip winning his next race?

Many hours of form analysis, mountains of data and years of experience go into calculating chance. Once you have your figure, you can convert it into “fair odds”:

Price = 1 / Chance
Price = 1 / 0.5
Price = $2.00

Then you can start looking for “overs” and bet.

Calculating chance: Were you right?

Profitable punting hinges on knowing whether your calculation of chance was right or wrong.

So how do you know whether your calculation of chance is accurate or not? Were you correct when you thought Richmond was an 80% chance of winning, or were they really just a 70% chance? It matters.

The fact is that in the majority of cases, each bet is just the one event (i.e. one match or one race) and you can never be 100% certain about the true chance a selection had to win. But there are some clues.

The starting price (or closing line) is one of the best indications about the true chance a selection had to win. Decades of historical data across every sport shows the starting price (in efficient markets, i.e. markets with lots of bets) is an incredibly accurate measure of chance. The public is incredibly accurate. If Nature Strip started as $2.00 favourite (ignoring the market percentage for a moment), we could say with a good degree of confidence that it was a 50% chance of winning:

Chance = 1 / Price
Chance = 1/ $2
Chance = 0.5
Chance = 50%

If your bet price consistently beats the starting price (or bet line beats the closing line), that’s a good indication your chance calculation is accurate.

Sample sizes

In some cases, the market might not be efficient (e.g. uncommon, unpopular markets). Or the public simply does not know the true chance of the selection winning. In this case, the only way to tell if your calculation of chance is correct is a long-term record of your selections.

A record is a critical aspect to any serious punter. But it is especially important in this context, because it is the gold standard (the only true way to know) whether your calculation of chance is accurate or not. If your record is profitable over a long series of bets (which unfortunately needs to be in the hundreds or thousands), then it shows your calculation of chance is accurate.

One of the tricky aspects here is that there is no set number of bets (sample size) to know whether your chance calculation is correct or not. The higher your strike rate, the less sample size you need (because there is less variance or luck in the number of winners). However, in general you still need sample sizes in the mid-to-high hundreds to be sure. In the thousands is better! It’s simply the more bets you make, the more confident you can be in your results.

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