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Re: [Fwd: Probabilities] - Overlay concept



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Speaking of gambling, and the Racetrack Betting Book..... I used to go to the 
West Palm Beach dog track for fun. While you really are unlikely to come away 
from such a place a consistent winner over time, it's fun and there are 
important corrallaries to trading. Well, anyway, there was a dog track 
betting magazine that I found fascinating.... some guy was writing a series 
of articles on a concept called "overlay betting"..... the basic idea that 
you wait to bet on situations where the Real probability of your horse/dog 
coming is much better than the pari-mutuel betting odds reflect.... EXAMPLE:  
1) You determine your horse/dog has a 1 in 3 chance of winning based on your 
handicapping,  but the payoff odds are 6 to 1, 7 to 1, etc.   That's an 
Overlay...  on the other hand, if the payoff is 3 to 2, even if your horse is 
likely to win, the bet is terrible.   Again, gambling is so rich with 
corrallaries to trading....I'll save you the story about Blushing John and 
Sunday Silence at the Breeders Cup.... my proudest overlay bet at the track :)