Upside vs. Downside Risk
Upside risk and downside
risk are terms that I�ve thrown around for years.
If you are a subscriber to the DAILY SOUTHERN CALIFORNIA HORSES TO
WATCH, you read those words nearly every day.
They are frequently used in our publication alerting clients to our
opinion about a specific horse in a specific race.
We need a working definition of both �upside and downside risk�
before going any further.
I�m going to keep it real simple definition-wise.
We�ll all agree that gambling involves a degree of �risk� because if
it didn�t, gambling wouldn�t be called �gambling�, it would be
called �banking�. Why would it be called banking? Because in
banking, there is the guarantee of a return vs. gambling where there
are no promises of any kind.
�Downside risk� means that there is a much greater likelihood of
losing than winning. This is not to say that one would never bet a
horse with all �downside risk�. If the odds were �right�, a horse
with nothing but �downside risk� might be worth a bet depending on
your past personal success record with similar �downside risk�
�Upside risk� means that there is more of a likelihood of cashing a
ticket than with �downside risk�, but with the full understanding
that there are never any guarantees that your mutuel ticket is a
As you can see from our simplistic definitions of these terms, they
are open to wide and varied interpretations.
In offering my opinions on both, I�m not looking to do battle with
other handicappers over the correctness of my interpretations. They
work for me in my personal methodology and that�s all that matters
to me. Additionally, I�m positively not attempting to superimpose my
thoughts over others or change their interpretations of �upside� vs.
What follows is nothing more than my opinion. And face facts,
opinion is what drives our great game.
Okay, what makes a wager either �upside risk� or �downside risk�
thru the eyes of Takach?
That�s an easy question to ask. But to answer, it requires very
careful analysis of many specific situations and interrelated
factors in any given race.
Every race is a very unique event that will only occur 1 time!
That statement forces a quick �sidebar�.
I continue to get a good laugh from the know-it-all professional
authors in our game who claim to have the �inside� on exactly �how
to wager�. Some go as far as to say that even if their readers are
only mediocre handicappers, their time-proven money methodology will
take them out of the red and into the black. All a reader has to do
is follow their impeccable money management techniques based on what
they deem as �value�. To them, a horse is allegedly offering �value�
when his odds are greater than they should be.
And how do these professional authors know exactly when the odds are
more than they should be?
They tell their readers that the way to determine the fair odds of
any runner is to ask themselves a simple question something like
this; �If this race were run a hundred times, how many times could
you expect this horse to actually win�?
There is no correct answer to that question, so don�t waste your
time trying to answer it.
Why can�t you answer the question you ask?
Simply because their basic premise is incorrect. The fact that they
would even imply that any one race could be run 100 times, only
speaks to their ignorance.
No race is run exactly the same way twice, let alone 100 times!
Something is always changing to include weather, post positions,
jockeys, trainers, track maintenance, trip, track bias, physical
condition and energy levels of each horse and rider, etc., not to
mention a different mix of handicappers that will handicap the race
differently and will therefore bet differently.
In essence what these professional authors are really doing is
guessing what a fair price might be or put another way, what they
personally perceive to be �value�.
If you�ve been educated in this manner and believe these misguided
souls to be correct with their �if this race were run 100 times�
nonsense, my sympathies go out to you. A mindset similar to this
only serves to fatten bankrolls of those who know better.
For the undecided and for those that have already come to the common
sense conclusion that no one race could possibly be run the same way
twice let alone 100 times, I invite you to further investigate
�upside and downside risk�.
At worst, you�ll confirm what you already know about �upside and
downside risk� and take comfort in the fact that you are well versed
when it comes to grasping the true meaning of the word �value�.
At best, you�ll pick up one or more pointers on �upside vs. downside
risk� that will continue to pay you dividends for the rest of your
Could this be yet another Takach �win-win situation�? Stay tuned!
PART 2---UPSIDE vs. DOWNSIDE RISK
Copyright �2003 by
Joe Takach. All rights reserved.
Joe can be contacted through his website at
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