Want to learn to bet? Betting 101 is the place to start and today’s lesson is about Bookies Fluctuations.
So the bookmaker has put up a market on a race and punters start betting…
The difference between a large-scale betting market and the coin toss example that we looked at. is that the punters don’t behave perfectly.
They don’t place their wagers in equal proportions like you and your mate placing $10 each on either side of the coin. They bet as much as they like on whichever outcome they like.
It’s therefore up to the bookmaker to adjust his prices throughout betting to manage this and ensure his own position.
In our race, he put up Winx at $3. As an example, he may notice straight away that 95% of the money coming in is on Winx. If that’s the case, he’s not going to leave the $3 up and keep taking all the money when punters clearly believe Winx is a better chance than $3 (or 34%). So he’ll wind the price in. So anybody who bets on Winx after the reduction in odds gets paid at lower odds
This lessens his liability on Winx for any more money coming in, and also discourages further betting on Winx among punters. But it doesn’t all happen one way. To try to balance his book, in turn he’ll wind the price out on other runners, so that he can attract more money for them and give himself a healthier range of outcomes.
These movements in price are called fluctuations, and bookies make them constantly.
It would be comfortable and easy for a bookie if he took the exact right amounts on each horse to ensure the same dollar result for himself, no matter who wins. That’s not realistic, so his outcomes vary. Generally, the majority of money is held on the favourites, so the bookies have a much better outcome when there’s a shock result in a race. When you see a number of favourites in a row win, you might hear comments such as “the bookies are getting smashed”. On the flipside, a string of outsiders winning is seen as a “nightmare for punters”.