Understanding Horse Racing Odds

Invariably, a novice horseplayer will go to the racetrack or sign onto a horse racing betting site, only to be overwhelmed, by numbers, odds and statistics. The truth is many experienced horseplayers are not always sure how a horse’s odds are determined. We will address this at two levels. First, we will discuss “fixed-odds betting,” which is prevalent in Europe and some parts of Asia. Second, we will discuss pari-mutual betting, which is used in North America, South America and some parts of Asia.

Fixed–Odds Betting –  Historically, fixed-odds betting was the only option available. It wasn’t until the advent of computers that parimutual betting was given life. Still, most parts of Europe only offer fixed odds betting. All across Europe, professional bookmakers take bets on horse races. They do their own due-diligence to come up with the starting listed odds on every horse in every race. Bettors or punters usually align themselves with one or two primary bookmakers. However, they always have the option of shopping prices when they want the best odds possible. For the most part, the odds are quite similar from one bookmaker to the next. However, small variances can make a big difference for experienced horseplayers. If a horseplayer really likes horse A, it could very well be worth the effort to see if they can get the highest posted odds possible. Once the wager has been accepted, the odds for that horseplayer are etched in stone. The bookmaker may elect to change a horse’s odds after a large bet, but it won’t affect people who already hold tickets.

Parimutual Betting – Where parimutual betting is used, the racetrack owners want no vested interest in the outcome of a race. In fact, no one wants that kind of exposure. Essentially, parimutual or pool wagering is nothing more than a system where horse players are competing among themselves.

For our example, we will use win wagers, bets that a particular horse will finish first. All money wagered to win on every horse in a race is dumped into a big win pool. From that pool, there’s a prescribed “take-out.” Some people might refer to it as the “vig” or “vigorish.” At most tracks in North America, the take-out on single horse wagers is about 15%. The 15% that is removed from the pool is distributed to the track owners and the horse racing governing body for the track.

After the take-out is removed, the remaining portion is the amount that will be distributed among the horseplayers that bet on the winner. Since most tracks use $2 as the standard bet amount, the odds are calculated to the nearest $.20 based on the number of $2 tickets bet on the winner.

Exotic wagers such as exactas, trifectas, daily doubles and pick-threes have separate wagering pools. Again, the take-out is removed, and the payout is based on the number of winning tickets wagered on the outcome. In many cases, exotic wagers carry larger take-outs because of the larger payouts. For what it’s worth, the total sum of all exotic wagers is typically higher than the total sum of all single horse wagers.

One last note. Most America-based horse racing betting sites create a cumulative parimutual pool on European races. The pool usually includes all betting sites across the Americas.