Parimutuel betting, also regarded as pool betting, is a unique wagering type in which all stakes on a specific event are collected together in a pool. You place your wagers not against a bookmaker but rather against fellow gamblers betting on the same event. Those who made winning selections get equal shares of the pool, deducting vigorish that goes to the house.
Parimutuel betting is absolutely legal virtually everywhere. While this wagering type is conventionally applied in horse racing and greyhound racing, it can also be used in other sports where the participants finish in a ranked order.
Let’s explore the fundamentals of parimutuel betting and discover how to deal with this betting type.
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What is Parimutuel Betting?
Essentially, parimutuel betting differs from traditional fixed-odds betting, which is primarily associated with sports gambling. The exceptional thrill of this approach lies in the fact that bettors don’t know their wager’s final price or return. The payout may range drastically from the sum lower than the initial stake to massive amounts.
The following features distinguish parimutuel betting:
- Pooling of bets. All bets on a specific event’s aftermath go into a common pool.
- Dynamic odds. The odds are not locked at the time of placing the bet. Instead, they fluctuate based on the total amount wagered on each possible result until the pool is closed.
- Shared payouts. Payouts are determined by dividing the remaining pool among all the winning bets. The amount going to each winner is proportional to their stake relative to the total amount wagered on the winning selection.
- Odds calculation. Gamblers know the final odds and payouts only after all bets are placed and the pool is closed. This makes the process transparent and ties it to the collective betting activity.
How does parimutuel betting work?
The fundamental principles behind the parimutuel betting operation are the accumulation of all bets in a pool, payouts’ correlation with the total amount wagered, and the distribution of bets across the outcomes.
How does the process work step-by-step?
Here’s a brief description of a parimutuel protocol.
- Bet placement. Gamblers place their wagers on the event’s aftermath, such as different horses or greyhounds in a race.
- Pool creation. All the bets are collected into a common fund or a pool.
- Vigorish subtraction. Before bookmakers calculate the payouts, they deduct a commission (vigorish) from the total pool. This vigorish covers the bookmakers’ expenses and profit.
- Determination of winning result. As soon as the event concludes, the winning outcome is determined. For instance, the horse that finishes first in a race.
- Payout calculation. The remaining pool (after the vigorish is deducted) is divided among all the bettors who made stakes on the successful result. The return for each winning bet is proportional to the bet amount. Thus, the more money bet on a particular outcome, the lower the payout per unit of stake, and vice versa.
How are the odds calculated?
Let’s keep in mind the two primary factors determining parimutuel odds:
- The overall sum of money wagered in the pool;
- The total amount of money wagered on each possible outcome.
To help you understand the process in more detail, I’ll demonstrate several examples of parimutuel odds calculation in popular sports.
Parimutuel betting examples
Horse racing and golf are some of the most widespread application areas for parimutuel bets. That’s why I’ve chosen these kinds of sports to demonstrate the fundamentals of odds calculation.
Parimutuel betting in horse racing
Let’s assume that in a horse-racing event, $80,000 is placed on the win market for the race, with the bookmaker applying a 10% vigorish, making a total pool of $72,000. All wagers are placed on the five ante-post favorites to triumph as follows:
- Horse A: $35,000
- Horse B: $15,000
- Horse C: $10,000
- Horse D: $8,000
- Horse E: $4,000
For further calculations, we need the cumulative pool size ($72,000) and the amount staked on each horse. By dividing the first by the latter, we’ll get the odds, which would subsequently lead us to potential payouts.
- Horse A: $72,000 / $35,000 = 2.06 (+106)
- Horse B: $72,000 / $15,000 = 4.80 (+380)
- Horse C: $72,000 / $10,000 = 7.20 (+620)
- Horse D: $72,000 / $8,000 = 9.00 (+800)
- Horse E: $72,000 / $4,000 = 18.00 (+1700)
According to betting volumes, Horse A would be the favorite in the race. The starting odds of +106 mean a $100 wager would return $206 ($106, excluding your initial stake).
Conversely, the least popular participant (Horse E) has impressive odds of +1700. Therefore, it can yield a net profit of $1,700 from your $100 wager.
Parimutuel betting in golf
Let’s consider a golf tournament, where $200,000 is wagered on the win market, with the bookmaker applying a 10% vigorish. Therefore, a total pool makes $180,000.
1. The bets and the pool.
- Golfer A: $80,000
- Golfer B: $50,000
- Golfer C: $30,000
- Golfer D: $20,000
- Golfer E: $20,000
Total amount wagered: $200,000
Commission (10%): $20,000
Net pool: $200,000 – $20,000 = $180,000
2. Odds calculation:
- Golfer A: $180,000 / $80,000 = 2.25
- Golfer B: $180,000 / $50,000 = 3.60
- Golfer C: $180,000 / $30,000 = 6.00
- Golfer D: $180,000 / $20,000 = 9.00
- Golfer E: $180,000 / $20,000 = 9.00
3. Payouts calculation:
- If Golfer A wins: A $100 bet on Golfer A would return $225 ($100 * 2.25).
- If Golfer B wins: A $100 bet on Golfer B would return $360 ($100 * 3.60).
- If Golfer C wins: A $100 bet on Golfer C would return $600 ($100 * 6.00).
- If Golfer D wins: A $100 bet on Golfer D would return $900 ($100 * 9.00).
- If Golfer E wins: A $100 bet on Golfer E would return $900 ($100 * 9.00).
Types of Parimutuel Bets
The examples described above introduce simple win bets. There are also other types of parimutuel bets, according to the outcomes they imply.
- Place. You bet on the selection to finish first or second.
- Show. You wager on a selection to finish in the top three positions.
- Across the board. A combination wager that includes three different bets: win, place, and show.
- Each-way. This bet combines a win and a place wager on the same candidate.
- Superfecta. You predict the first four finishers in exact order.
- Trifecta. You predict the first three finishers in exact order.
- Daily double. You must select the winners of two consecutive races at the same track.
Parimutuel Betting Strategy
One of the uncertainties of parimutuel betting is that you don’t know the odds until the event closes. However, when betting on horse racing, you can collect real-time information from The Tote board, deriving precious insights into the contestants’ popularity and the probability of payouts.
Here are several tips on how to make your parimutuel betting strategy more efficient.
- Select the sites with the lowest vigorish. Commissions may vary across bookmakers. The sports betting sites with the lowest vigorish will grant a greater return and better odds.
- Prioritize short-priced favorites. You can browse fixed-odds betting sites to get an overall understanding of the price. If you target short-priced favorites, you’ll typically obtain a bit higher value on parimutuel markets, considering that lines won’t move based on the wagers’ volume from other choices within a market.
- Start by win, show, and place wagers. If you are new to parimutuel betting, focus on the simpler wagering types rather than delving into more intricate approaches. A straightforward strategy will help you optimize returns.
- Consider progressive jackpots. The Tote, a well-known operator of parimutuel betting services, often enhances online gambling excitement by offering progressive jackpots. These jackpots grow larger with each event until a bettor wins, multiplying the potential reward. By keeping an eye on progressive jackpots, you can enhance your chances of significant payouts.
Final thoughts on the parimutuel betting
Parimutuel betting is a particular type of sports gambling as its way of collecting stakes and calculating odds differs from conventional wagering approaches, such as spread betting, parlay betting, handicapping, and more.
However, parimutuel betting enables you to access longer prices compared to fixed odds, take advantage of enhanced betting lines, and substantially increase returns by making higher stakes.
Expanding your knowledge and skills in this betting type, following the suggested tips, and managing your risks will help you develop a balanced approach to sustainable gambling.
