# The importance of price

Rod explains why getting the best possible price is one of the most important factors you can focus on.

## The formula for prices and profits

You might have heard the punting mantra “it’s all about price”.

Assuming you have a profitable set of tips and sound bankroll management, getting the best price you can is one of the most important factors you can focus on. And while we all know that \$2.20 is better than \$2.00, something most punters don’t realise is just how much of a difference small changes in price actually make to their bottom line. In some cases, it’s the difference between winning and losing.

An earlier article I wrote I described an equation that can be used to calculate the “break even price”. In other words, when you receive a tip at \$2.20, but by the time you reach it after work it might be \$2.00, is the value gone or is that price still worth a bet? The answer is you will break even long-term in this example (using 10% Profit on Turnover).

But how much better value do you receive when you back a horse at \$2.20, instead of \$2.00?

The formula to work out the overs you receive on a bet is:

Overs = (Price Received – Rated Price) / Rated Price

For example, if a horse is rated a \$2 chance and you receive \$2.20 as your price, your overs are calculated as follows:

Overs = (Price Received – Rated Price) / Rated Price

Overs = (\$2.20 – \$2) / \$2

Overs = \$0.20 / \$2

Overs = 10.0% P.O.T.

On a side note, you can work out the percentage difference between two prices (e.g. 1/\$2 – 1/\$2.20 = 50% – 45.45% = 4.54%) but that does not reflect the overs you receive on a bet.

The above formula is certainly useful and one I use all the time. However, a more interesting formula is a formula I derived recently that tells you the new P.O.T. you receive when you back a tip at a better price than was quoted:

N = B [ ( O + 1 ) / T ] – 1

where:

N = New P.O.T.

B = Better Price

O = Old P.O.T.

T = Tipped Price

That’s complicated but let me run you through an example. Let’s say you receive a tip at \$3.00 from a pro who has a 10% P.O.T. record. You’re lucky enough to back it at \$3.20. What is the new P.O.T. you have now received?

N = B [ ( O + 1 ) / T ] – 1

N = \$3.20 x [ ( 0.10 + 1 ) / \$3.00 ] – 1

N = \$3.20 x [ ( 1.10 ) / \$3.00 ] – 1

N = \$3.20 x 0.3666 – 1

N = 1.1733 – 1

N = 17.33% P.O.T.

For a measly 20 cent difference in price, you’ve effectively increased your profit by 73%. That’s quite significant!

We tend to see the difference between \$3.20 and \$3.00 as minimal because \$0.20 is a small amount relative to \$3.00 (just 6.6%). However, as punters the key is profit and when you consider the break-even price is \$2.72 and \$3.00 is the price at which you will make 10% P.O.T., then \$3.20 is a significant jump.

So, while \$0.20c is pocket change in daily life, when it comes to the punt, small differences in price can have a significant effect on your bottom line.

Rod is the brain (and the maths) behind our consistently profitable High Low service.

By focusing on the best specials he runs a package that has exceptionally low volatility. The High Low covers both racing and sports and is one of our most popular memberships.