Gramps
4th September 2001, 06:00.07 AM
This has probably been covered somewhere else, and I think Bill Ziemba may have mentioned this in one of his books or other publications. But it occurred to me tonight when I was reading Ken's article about bridge jumpers.
A bridge jumper who hits over 95% of his show bets will show a profit. And the paradox of the situation is that it's possible for you to show a profit at the same time and on the same races.
The phenomena that makes this possible is the rule that tracks must pay five cents on the dollar, or a minimum of $2.10 per $2 wagered. The $2.10 payoff will sometimes result in a minus pool, which the track has to make up, and that can lead to the mutuel benefit of the bridge jumper and the man who bets against him, as well over the long haul. The track pays both ways.
As an example: Assume that your bridge jumper bets $100,000 to show on 100 favorites in 100 five horse fields over the course of a few years. Now assume that the man is so good at his selection that he hits 97% of all of his bets, or 97 out of the 100 show bets. Assume that he makes his bet very early and that discourages others from placing big show bets, so that only $1,000 more is bet on the horse to show. And assume that, counting the $10 you're going to bet on each of the other four horses, there's a total of $1,000 bet on each of them. So there's $105,000 in the pool.
When the man's horse comes in, you're going to get back $21.00, since you're going to cash two $10 tickets at a $2.10 mutuel. The fun part occurs on the three times his horse does not come in. Out of the $105,000 bet, the track takes its 16%, or $16,800, leaving $88,200. We now take out the $1,000 bet on each of the three horses who ran in the money, leaving $85,200. Next, we divide that by 3, which is $28,400, then divide that by $1,000 bet on the horse, which gives us 28.40. We multiply that by 2 and add the $2 bet, for a mutuel of $58.80, which we have five times (a $10 ticket), or $294, on three of our four horses, or a total collect of $882.
So we bet 100 races at $40 per race, for a total bet of $4,000
We collect $21.00 on 97 occasions, for $2,037
We collect $882 on 3 occasions, for $2,646.
We collect a total of $4,683, for a profit of $683, and an ROI of 1.17
The bridge jumper made money, too.
He put $100,000 times 100 or $10,000,000 through the windows.
97 times he wins $5,000 (or you can say he collects $105,000 that often for $10,185,000) for a profit of $485,000.
3 times he loses $100,000 (or you can say he collects zero on those occasions) for a loss of $300,000.
Either way he wins $185,000, for a ROI of 1.0185
And the track foots the bill on both sides, because of the minus pool created since it has to pay out 5% to the bridge jumper and the others who cashed show tickets on the 97 races the bridge jumper's horse came in.
Of course in real life, the bridge jumpers don't hit even 95%, which improves the ROI of people who bet against it. On the flip side, the pools aren't usually imbalanced by a factor of 20 to 1. But my read on it is that a person who bets against bridge jumpers can probably achieve an ROI of about 1.25 or possibly more.
And now that my stomach has settled, I'm going back to bed.
A bridge jumper who hits over 95% of his show bets will show a profit. And the paradox of the situation is that it's possible for you to show a profit at the same time and on the same races.
The phenomena that makes this possible is the rule that tracks must pay five cents on the dollar, or a minimum of $2.10 per $2 wagered. The $2.10 payoff will sometimes result in a minus pool, which the track has to make up, and that can lead to the mutuel benefit of the bridge jumper and the man who bets against him, as well over the long haul. The track pays both ways.
As an example: Assume that your bridge jumper bets $100,000 to show on 100 favorites in 100 five horse fields over the course of a few years. Now assume that the man is so good at his selection that he hits 97% of all of his bets, or 97 out of the 100 show bets. Assume that he makes his bet very early and that discourages others from placing big show bets, so that only $1,000 more is bet on the horse to show. And assume that, counting the $10 you're going to bet on each of the other four horses, there's a total of $1,000 bet on each of them. So there's $105,000 in the pool.
When the man's horse comes in, you're going to get back $21.00, since you're going to cash two $10 tickets at a $2.10 mutuel. The fun part occurs on the three times his horse does not come in. Out of the $105,000 bet, the track takes its 16%, or $16,800, leaving $88,200. We now take out the $1,000 bet on each of the three horses who ran in the money, leaving $85,200. Next, we divide that by 3, which is $28,400, then divide that by $1,000 bet on the horse, which gives us 28.40. We multiply that by 2 and add the $2 bet, for a mutuel of $58.80, which we have five times (a $10 ticket), or $294, on three of our four horses, or a total collect of $882.
So we bet 100 races at $40 per race, for a total bet of $4,000
We collect $21.00 on 97 occasions, for $2,037
We collect $882 on 3 occasions, for $2,646.
We collect a total of $4,683, for a profit of $683, and an ROI of 1.17
The bridge jumper made money, too.
He put $100,000 times 100 or $10,000,000 through the windows.
97 times he wins $5,000 (or you can say he collects $105,000 that often for $10,185,000) for a profit of $485,000.
3 times he loses $100,000 (or you can say he collects zero on those occasions) for a loss of $300,000.
Either way he wins $185,000, for a ROI of 1.0185
And the track foots the bill on both sides, because of the minus pool created since it has to pay out 5% to the bridge jumper and the others who cashed show tickets on the 97 races the bridge jumper's horse came in.
Of course in real life, the bridge jumpers don't hit even 95%, which improves the ROI of people who bet against it. On the flip side, the pools aren't usually imbalanced by a factor of 20 to 1. But my read on it is that a person who bets against bridge jumpers can probably achieve an ROI of about 1.25 or possibly more.
And now that my stomach has settled, I'm going back to bed.