I was just reading an acticle about this professional gambler who is generating a lot of media attention at the moment. He really has taken things to a new level :-
His systems have been described as a "Money Mine" and although a lot of his annual profits (>$44m) are as a result of Money Rebates, some of his profits are solely to the automated and mathematical algorithms pre race, inc UK markets. It just goes to show that the sky is the limit!
Anyway, worth a read
regards
Peter
Last edited by PeterLe on Sat Jul 28, 2012 2:49 pm, edited 1 time in total.
That's a very revealing story but I am astonished at the stupidity of bookies giving such large rebates. Amazed at that, obviously missed a trick there.
Due to his sheer size he has persuaded the totes to pay him “rebates” or “loyalty payments”.
In the US, the syndicate received an average rebate of 13 per cent on all losing bets, according to court documents.
From there the maths is pretty simple, as Ranogajec told the court.
“If you bet $100 and lost $5, but you get a 10 per cent rebate, you still make 5 per cent,” he said.
That means the more money you can turn over, the more money that comes back to you in rebates. And so it becomes a matter of ensuring that any losses are less than the amount rebated.
The court documents show that just 15 per cent of what the syndicate earned from US racing over that 3½-year period was from selecting the right horses.
Their winnings on a correct punt were just $8 million – a figure dwarfed by the $44 million earned from losing bets with rebates attached.
I've been following these guys for a couple of years, ever since David Walsh built the MONA.
Historically in most austalian Tote operations my understanding was from each $100, $85 goes to the pool, $5 goes to the government in tax, $5 to the tote shop (what was once your local betting shop), $5 to the tote operator.
Direct telephone accounts (before the days of the internet) eliminated the $5 to the betting shop. So $10 on the direct bets goes to the tote operator. As you an imagine a no risk 10% take on turnover is exceptionally profitable, especially if you don't need a high street betting shop with its associated overheads.
So the totes starting rebating to the very high turnover punters, much in the same way casinos rebate losses to very high rollers. At the casino though post rebate high rollers (generally) cant be e(x) positive.
The punters club on the other hand can be.
I've walked past his operations many times. Given the Olympics are on at the moment it seems apt to mention it is opposite the pool named after Ian Thorpe.
Intriguing in that he believes in the wisdom of crowds (eg. SP on betfair no overround is very accurate), vs odds set by bookies.
Of course, I also understand the Club made a lot of their money from totes (parimutuel betting) and by definition that has the "wisdom" built in less the cut taken out from the pool.
Possibly the best reinforcement is the explanation that the strategy changed very much over time. Things that worked then don't work now.
Yeah, so my take on the PC/commission conversation is just that he is on a fixed commission rate instead of PC, but because his type of strategies are likely to be arb or straight betting, his rate is probably quite low. He'd likely be paying little to no PC if he was on the regular PC system.
Obviously I'm just guessing, and it can't be confirmed since he seems so evasive of any specifics. I get the impression he doesn't fully understand the difference/similarities of the two systems since I see no reason why he wouldn't just say that's what it is if he actually understood it.
He says he's in a situation where both he and Betfair make money. That's the case with all active PC payers as well, otherwise they wouldn't be active anymore! His rate is the same irrespective of his profit, and profit is unlimited - all exactly the same as PC. All that matters is what his rate is, and how consistent his win/loss is. If we knew that, we'd know for sure whether he is on a better "deal" or not, but I'm assuming not, and Betfair are earning just as much off him than anyone else.
If you pay a fixed 6.5% and have a low strike rate then you end up paying the same as on PC, so there is essentially no difference.
I understand the business model pretty well and it can be simplified to a pool that can only get a rake from winners. So if you just take from that pool you need to pay a big % to refill it and the opposite is true.
I guess that Betfair feel they need more than the winners as they have to drive the losers to the pool so will set up any 'deal' to match that require rate. In essence, it's likely there will be little difference between one and the other.
In my experience, if people offer me a 'special deal' it's a red flag to look at the detail.
I just did a quick calculation on my results yesterday, which was a fairly standard day for me.
Assuming each of my bets was considered an independent market (i.e. I pay commission on every bet that I win, and nothing if I lose, and do NOT reconcile by total gross market profit - this is similar to how Matchbook charge), then I'd have to be on 1.2% commission rate to make me pay the equivalent Premium Charge of 40% on total gross profit.
I could "negotiate" with Betfair and they'd offer that me that fixed rate. 1.2% sounds like a fantastic deal, right!! I might even think I'd taken them for a ride. Nope - same damn thing. Still giving away 40% of my gross profits!
This is why Matchbook commission rates are rubbish for traders. 1.5% for taking, and 0.75% for offering. So everyone is basically already paying PC on Matchbook.
Of course Betfair reconcile by total gross profit per market, and not per bet, but just using each bet as an independent market above is fine for extrapolating out what a straight better or arber might have as a strike rate. Betfair's reconciling-by-market while paying 5% base commission is still way better for a trader. That is until you hit higher PC rates.
