SHARPS and SOFTS
BSP v BOG (Betfair Starting Price v Best Odds Guaranteed)
The terms “Sharps” and “Softs” refers to bookmakers that operate very different business models. Sharp bookmakers operate a low margin / high turnover model and Soft bookmakers operate a high margin/low turnover model. Examples of Sharp bookmakers would be Pinnacle or one of the larger Asian firms such as SBO and examples of Soft bookmakers are all around us in the UK (Ladbrokes, Hills, Corals, 365, indeed, all of the household names). Why is this of any concern to ourselves as punters?
To answer that, we need to refer to our old friend, The Efficient Market Hypothesis (EMH). The hypothesis is that in public markets, at any given time, all information is incorporated into the prices. Therefore, prices only move in reaction to new information. As a consequence it is not possible to “beat the market”. There is strong mathematical “proof” of the EMH and also compelling empirical evidence that contradicts the theory, but that discussion is for another time. This conflicting evidence results in there being a “weak”, “semi-strong” and “strong” EMH.
Back in our real world, let us take an example of a football match. Well in advance, the Sharps will offer tentative prices and punters (skilled and unskilled) will begin to place their bets. The Sharps will take more note of the skilled punters judgement and adjust prices and gradually build a balanced book as the prices become stronger and a reflection of the supply and demand in the market. The prices become ever more accurate and the margins ever smaller as more information comes into the market place (team news) and kick off time approaches. At kick-off the “closing line” price is the most accurate assessment of the likely outcome.
Can punters “beat” the closing line? EMH says “no”. Certain tipsters and companies that act as adjudicators of tipsters, offer empirical evidence that says “yes”. They are, or know of, a tipster that bets at closing line (or BSP if we were referring to UK horse racing) and has recorded profits. But, is the sample size of bets large enough? Is the tipster merely experiencing a lucky run? If we had a coin-flipping contest with 5,000 coin-flippers, one would emerge victorious and he would be “champion coin-flipper”….but so what? Again, this argument is mathematically complex and this article is not the place for mathematical proofs. For now, let us just agree that beating the closing line of the Sharps is extremely difficult.
It is with the Sharp bookmakers that we see evidence of the EMH. Sharp bookmakers have the largest markets. In reality, Soft bookmakers are merely brokers of bets. The Sharps are the market makers and the Softs merely copy the prices. At first glance, because the Sharps bet to slim margins and allow big bets and don’t restrict/close accounts, it looks like they are the bookmakers we should concentrate on and find it easier to win with. But, in reality it is the opposite that is true. It is the Softs that offer the greatest scope for profitable betting.
To win with either, it is clearly optimal to bet before the closing line. The following applies to horse racing but can be applied to other sports betting. We need to bet before the closing line because we know at the closing line, the market is at it’s most efficient. Let us run through the stages for betting on horse racing;
Ante-Post…..Softs protect themselves with large margins in the prices.
First prices…Evening before racing. Again, Softs have large margins and restricted stakes.
Morning Prices….Margins are reduced and higher stakes permitted. On the exchanges (Sharps) liquidity is building.
Pre-race….Lowest margins and highest stakes permitted. Market becoming more and more accurate.
We are aiming for the sweet-spot of lower margins, better liquidity and a less than perfect/knowledgeable market. To some degree where that sweet-spot is, depends upon your own circumstance.
This is an article about betting at Best Odds Guaranteed or Betfair Starting Price and no mention so far of BOG! However, it should now be clear quite what a valuable concession BOG is. In the correct hands it enables you to bet at early prices (really valuable to punters who can correctly identify “value”) with the guarantee that you get a bigger price if you are wrong (and even the shrewdest will see the market move against them on a fairly regular basis). In effect you are betting against the bookmakers’ odds compilers when betting at BOG. They are quite a shrewd animal, but are not the beast that is EMH or the “wisdom of the crowd” (which is what BSP or the closing line represents.) So, if you are skilled and have a profitable strategy, betting at BOG is optimal over BSP, despite the minimal margin you are attempting to overcome with the latter. Conversely, if you have a losing strategy, you would be better off betting at BSP and simply losing the low margin (essentially your commission).
There are examples when betting at exchange prices in the 15 minutes before a race (to assure liquidity) is optimal over BOG (an example might be outsiders in big fields). But these are specific circumstances and should be viewed as exceptions that prove the rule. As a profitable punter you should utilise BOG….it is one of the key concessions that the Softs grant……
In the next article, I will cover some other concessions that the Soft bookmakers offer and how and why you should take advantage.