Handicapping the Derby

The key to profitable kentucky derby betting is to remember that you are not playing against the track.  You are playing against the other bettors.  The track will earn a profit no matter which horse wins.  You will average a profit if the other bettors are overvaluing the wrong horses.  Successful handicapping is the art of finding overlays. An overlay is simply an opportunity to make a profitable bet. This opportunity might arise if a strong horse is undervalued by the other bettors, or it might occur if the bet on a horse is significantly overvalued, in which case a combination of bets on the remaining field may be lucrative. In either case, what you are looking for is not the most likely winner. Instead, you are looking for a payout ratio that is overly generous compared to the true likelihood of the outcome you are betting on.

Kentucky Derby Odds Payouts

Odds payouts at the track are expressed as fairly straightforward ratios.  If a bet is listed as “3/1,” it means that the bet will pay three dollars in profit for every one dollar that is wagered.  Horse racing tracks set these ratios by using the pari-mutuel betting system.  Under the pari-mutuel system, the payout for a wager is decreased for every new person that makes the wager and increased for every person that makes an offsetting wager. In this way the track can completely eliminate risk and have a fixed percentage payout regardless of which horse wins. The total amount that is paid out is the total value of all of the bets, minus the track’s “takeout” percentage.

In 2011, the takeout for the Kentucky Derby at Churchill Downs was 16% for standard (Win, Place or Show) bets and 19% for the more exotic wagers. Therefore, in order to average a profit through on-track betting at the Kentucky Derby, you would need to find overlays that are profitable enough to overcome this 16-19% takeout percentage.  It is also important to note that because the odds can fluctuate after you have placed your bet, it is to your advantage to wait until the end of the betting period to make your wager. That way you can have the best possible information about the actual payouts that will be offered.

The Overlay

Expert handicappers use research and statistical analysis to find the best available overlays. Successful handicappers review not just the horse, but also the jockey and trainer. Mathematical ranking systems such as the Dosage Index (measuring pedigree) or the Beyer Speed Index can be used in combination with other analysis. Here it is important to have access to information, but it is even more important to have a true understanding of how to weigh the importance of the various factors being reviewed. Horses are often overvalued because information about them is overvalued.  Other bettors may overvalue a horse’s recent win, without taking into account the factors surrounding that win. Did the horse have the same jockey? Was the competition difficult? Was the track similar to the current race?

Even without this kind of in-depth analysis, it is still possible to have an edge against other, less reasoning bettors. Review The Daily Racing Form, or other online analysis. Pay close attention to the fluctuations in the payouts that are offered, and remember to value a good deal more than you value a favorite.  Above all, avoid tips and hype that might cause you to bet with the crowd and lower the value of your possible payouts.

Exacta Overlays

There are also opportunities to find overlays using math only, with no knowledge of horses.  One of the most common math-based strategies is to look for exacta overlays. Here the goal is to find a significant discrepancy between the odds offered on a two-horse exacta bet, and the odds offered on the two horses individually. The overlay is possible because the exacta pool of money used to determine the exacta payoff is separate from the main pool of bets on individual horses. If a particular exacta combination is underbet, then it may offer significantly better odds than betting either of the two horses individually.

Finally, even with the best possible analysis, a 16% track takeout will significantly reduce your profit potential. Online racebooks can provide a significantly cheaper alternative.  Some offshore betting sites offer rebates that can effectively reduce the takeout to as little as 1 or 2%.  This will have a huge mathematical impact on your expected return over time.  Profitable Kentucky Derby betting requires that you maximize your edge while also minimizing your costs.