How horse racing odds work

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How are horse racing odds calculated?

Racing odds are calculated by considering a number of factors for each horse. While you might think this is all done automatically by sophisticated computer software, that’s only partly true. Modern bookies rely on the same basic cues and information their predecessors did a century ago.

This is because a horse’s chances in a race are related to factors that have to be assessed by trained experts while the horse is racing or in training.

The following people are important sources of information and analysis on a horse’s form:

gallops watchers present at the horse’s stable
form experts
private handicappers

Once these experts have weighed in with their opinions, and submitted their feedback to a bookie, the field is ranked according to ability, form and likelihood of victory in a race.

Bookies then consider at a few other factors before setting prices.

Especially for high profile races, this includes how the public is likely to bet based on the horse, jockey or trainer’s reputation, race record and experience. This is critical because a win by an overpriced favourite in a big race can seriously hurt a bookie’s bottom line.

Once all this data has been compiled, software steps in to crunch the numbers and generate a price for every horse in the field. During this process bookies add a small margin to each price to ensure an overall profit on the race irrespective of which horse wins. This is known as the overround, and you can read more about this here.

After the overround has been applied the price on each horse should be accurate enough that the odds can be used to determine a reasonably accurate statistical probability of the horse winning the race.

The art of borrowing odds

It’s important to mention that not every bookie will go through this process for every entry in every race. Instead one bookie will be the first to publish prices, and other bookies will then follow suit, using the early odds as a reference point.

At this point the odds released are somewhat speculative, and prices will tend to fluctuate as punters begin putting money behind horses. This puts bookies at risk of big losses if many punters get behind a horse at an inflated price. Because of this the first bookie to publish odds will generally include larger overrounds in the price of every entry to compensate for this risk.

These early odds will also be used as a reference point by betting exchanges. Once the price enters the betting exchanges, the market takes over as punters try to secure the highest possible odds on back bets, and the lowest possible liability on lay bets.

In this process an interesting thing happens – the weight of independent punters haggling over prices in the exchange tends to establish very accurate odds for most entries in the field. Without an overround affecting these prices, they are often (but not always) the most accurate reflections of the probability of each horse winning the relevant race.

These odds are reputedly so accurate that bookies can benefit from using them to calculate their own prices.

How do horse racing odds work each way?

We go over each-way betting in some detail on this page, but we’ll provide a simple overview specific to horseracing here.

When you bet on a horse you will be offered the option of checking an ‘each-way’ box on the betting slip.

If you tick this box your stake will automatically be doubled. 50% of this stake will then go into a bet on your selection placing in the race.

Typically the odds on the horse placing will be ¼ of the price offered on it winning the race, but in some cases, depending on the size of the field or the bookie you’re using, this can range between ½ and 1/5 the horse’s listed price.

The number of places paid out for the race will also vary, depending on the size of the field and whether or not a place special is available for the race. Races with ten or more entries generally pay out three places, two places are not unusual for fields of nine or fewer horses, while up to seven places can be paid for handicaps with bumper fields.

If your horse wins the race, both halves of your bet will pay out. If your horse places in the race, only your place bet will pay out and only half your stake will be returned with your winnings.

How do horse racing odds pay out?

When you bet on a horse you’ll want to know how the odds pay out – how much cash you’ll end up with based on the price on your horse.

When you choose numeric odds on a horse (i.e. 2/1 or 3.0), this is pretty straightforward to calculate.

If you placed your bet at fractional odds (i.e. 2/1) you simply multiply your bet by your odds to calculate your profit. You then add your stake to this number to calculate your total payout.

If you placed your bet at decimal odds (i.e. 3.0), multiply your stake by the odds and you’ll get your total return, including the stake.

Where horseracing gets a little more complicated than other sports is in offering punters to the option to bet on a horse’s starting price or ‘SP’. When you bet on a horse’s SP you don’t know what the price is until the race is underway.

However, once the horse comes home the SP is published and you can calculate the return on your bet the usual way.

Many bookmakers offer a best odds guarantee on horseracing. This ensures that if punters take fixed odds on a horse and the SP is higher at the time the race starts, they’ll be paid out at the SP.

How are horse racing odds handicapped?

The simple answer is ‘they aren’t’. Handicap odds are rarely available in horse racing betting markets. Instead, handicaps in racing typically refer to physical weights assigned to horses in a particular race in an attempt to eliminate any advantage or disadvantages entries might have in relation to the rest of a field.

In betting markets, a handicap is a margin added to, or subtracted from, a competitor’s starting score to remove any advantage or disadvantage it might have. This will be done to inflate the price you can get on the favourite, or to improve the chances of winning a bet on the underdog, with a lower price as the trade-off.

Handicap betting markets are easier to apply to sports where there are only two contestants and the winner is decided by a score, as it just requires adding or subtracting a points margin to or from the final score of each contestant.

In racing, where most races are contested by several horses, and won by a distance rather than points margin, this is harder to represent in a betting market, which is why you won’t see it used at conventional online bookmakers.