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Originally Posted by blackthroatedwind
Understanding whether or not 20:1 in the future pool is a fair price, is, in fact, math.
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Originally Posted by ateamstupid
This is all speculation and estimation on your part, just like it is for me.
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Maybe they’re both right. This is clearly a math problem, as BTW said. But there IS going to be a lot of estimation and speculation involved, as Ateam maintains.
Even so, it’s useful to put numbers on a scenario that leads to Ateam's contension that “
El Areeb seems far and away the best value at 20-1. Whether or not you particularly like him in the Derby (I personally think he's legit), the 3YO competition in New York is such that two more blowout wins in the Gotham and the Wood are a reasonable possibility. If that happens, he'll be 6-1 tops in the Derby.”
So, Ateam wasn’t insisting that 20-1 is in itself a good bet. I think he was saying that 20-1 looks good compared to a likely 6-1 in the Derby. To see if that’s true, what we want to know is the expected value (ie, the mean value) of EA’s Derby day odds.
First, assume EA does start in the Derby, which is by no means certain. We can come back to that.
For the sake of argument, BTW was willing to give El Areeb a 50% chance of a blowout win in the Gotham and a 30% chance of a blowout win in the Wood. The chance of 2 blow outs is 50% x 30% = 15%. Ateam said that would lead to “6-1 tops”, so let’s say 5-1. So that's a 15% chance at 5-1. What about the other 85% of the time?
What’s the chance that EA wins both races, but not all that emphatically? Let's give that a (IMO very generous) 15% chance. What would his odds be in that case? I’m guessing 8-1.
That still leaves 70% of situations to deal with. Let’s say EA finishing in the top 3 of both races (but not winning both) would occur 50% of the time, and leave EA at about 20-1 in the Derby. And let’s say the remaining 20% of the time that he starts in the Derby, it’s off performances in the Gotham and Wood that are so uninspiring that EA is 40-1 on Derby Day.
His average odds (expected value) then would be:
(15% x 5-1) + (15% x 8-1) + (50% x 20-1) + (20% x 40-1) = 20-1.
So, under what I consider generous assumptions, El Areeb looks to have an average odds prospect of 20-1 in the Derby, assuming he starts.
Under those assumptions, there’s no apparent value in taking the Future Wager. And when we add in the not-insignificant chance that EA does not even start in the Derby, it makes the Future Wager bet on El Areeb considerably worse than waiting until Derby Day to make a bet.
Now, Ateam may disagree with the probabilities or odds I chose. I know they are crude estimates, but I thought the odds I used gave EA the benefit of the doubt. Ateam should be able to point to which odds or probabilities are out of whack, and show how, with his own estimate, the expected value on Derby Day is indeed lower than 20-1.
For example, Ateam might say that even with poor showings in the two preps, EA will be no worse than 30-1 (not 40-1, like I used). And that would lower the expected value of his Derby Day odds (if he starts) to 18-1. Other adjustments could bring it still lower, but I’ll be surprised if any reasonable scenario can get the expected value low enough to offset the risk that El Areeb doesn't even start in the Derby.