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Basic Betting Principles

Basic Principles of Betting Part 2

Wagering at the tote means betting against the anonymous mass of all other bettors, while a bookmaker bet is a simple and transparent transaction between the bettor and the bookie. In contrast to a tote wager the possible return on a bookie bet is known already at the placing, because of the fixed odds offered by the bookie (see determination of odds).

At the racetrack the odds are variable, since the variable (growing) pool is distributed on a permanently changing number of winners, as long bets are accepted. The apparent advantage of fixed odds is balanced by the fact, that a bookie bettor has to bear the credit risk of his bookie (beside the fact, that with variable odds the final figure can turn out to be higher than was at the placing of the bet). While profits at the tote are financed by a simple redistribution of stakes, a winning bookmaker ticket has to be honoured by the bookie with his own capital. In case a bookie has failed to balance his book, he might go broke and formerly fixed odds turn into bankruptcy quotas.

Of course, such bankruptcies almost never happen, since the core skills of a bookmaker include 1. the right prediction of the outcome of any betting event he offers and 2. the correct assessment of the distribution of wagers on each possible outcome of the event offered. If he knows his business well, he will direct the stakes by setting the odds in such a way, that independent from the actual result of the event, he will pay out less in profits than he collected in stakes.

In any cases where he could not balance his pay out profile successfully, he either makes an extraordinary gain or has to refinance a betting loss with his equity. Summing up, a bookie delivers similar functions as a totalisator, with perhaps a little more risk on his side. Therefore he charges similar commissions for his services, known as the hold, the juice, the vigorish or vig.

Actually bookie or tote wagers are mathematically no fair bets, considering the take or the hold as a mere premium for permanent availability the can be regarded as fair, as long as commissions stay on competitive level.

Basic Principles of Betting Part 1