SP is an abbreviation for ‘Starting Price’ and until now has been widely associated with traditional bookmaking. You may want to bet at SP when there are no early fixed odds on the race in question or if you believe SP will return greater odds than either the early prices or the Live Show / Board Price odds.
Interestingly, the SP odds offer an insight into how valuable our bets are at the moment the race begins.
Setting SP Odds
The method by which SPs are set for each runner varies in different countries. Traditionally in the UK the Starting Price for any horse in any race has been determined by the on-course bookies who form an aggregate price (the odds). Calculating the SP does not account for bets placed on the selection off-course — i.e. in betting shops and online — and has sparked a lot of debate across the industry as to whether this is fair.
Unlike the bookmakers’ Starting Price, the exchange’s Starting Price will be determined by balancing bets from customers who want to Back and Lay. So due to the fact it’s other customers placing the bets and because there is no margin for profit built in, you are more likely to find better odds on the exchange than the bookies’ SP.
Significance Of SP Odds In Betting
SP odds mark the latest pre-race point: where the market is formed, and the most money has been matched before going inplay. This is significant because at this moment the odds incorporate all the opinions of the public — both retail and professional — from the lead up to the race.
I discuss the Wisdom of Crowds theory in another post, which explains that the market naturally forms a strong “aggregation of diverse opinions” and therefore a “wise” and generally accurate representation of the true probabilities for horses to win the race. Essentially, it’s hard to find value from the SP because the “crowd” (i.e. the betting public) has eliminated most, or all, of the vastly incorrect prices.
The smart, professional money often comes into the market late, meaning the odds become increasingly accurate within the final 30 minutes before the off. The spreads are tight during this period, so the Back and Lay odds tend to be well-aligned with one other. The market is busy and competitive.
Indeed many odds change dramatically throughout the trading day before the SP. Large fluctuations can be observed both early and late on, before odds inevitably settle at values that are approximately “fair”: meaning neither a positive or negative value to the bettor. Therefore we can compare our price with the SP price to get an idea of how good or bad our value is.
SP Odds Summary
The SP odds can be used to check whether your selection criteria, betting system, tipster or other method is able to highlight value or not. You’re said to be ‘Beating the SP‘ if the odds you have achieved are higher than the SP.
The following summarises this concept:
- If your accepted odds rise drastically by the SP, then you would’ve beaten the SP by Laying this selection at an earlier, lower price.
- If your accepted odds fall drastically by the SP, then you would’ve beaten the SP by Backing this selection at an earlier, higher price.
At this point, you may of course be asking yourself: Can the market be relied on for accuracy? and does it really show us what bets are “good value” and those that are “bad value”?
I was very reluctant to believe in the idea of market efficiency when I started out on Betfair, and learnt the hard way. My conclusion is that on average (and i do stress average) the market is surprisingly accurate and can certainly can be relied on for estimating your value over a large number of bets. I’ve recorded my research on this topic — for evidence of my findings please read my analysis on Drifters & Steamers.
So, Think of it This Way…
If a liquid market is assumed, and you are able to back at significantly higher odds than the SP on every one of your bets… then no matter what fluctuations you observe throughout the day, you are almost certainly onto a winning strategy.
To some of you this may sound obvious, or maybe even easy. But i assure you, in practice it’s quite the challenge! For suggestions on how to beat the SP, read my Punter’s Guide To Beating The SP.