In gambling, Dutching is sharing the risk of losing across a number of runners by backing more than one selection in a race or event. One needs to calculate the correct stake to place on each selection so that the return is the same if any of them wins. Although not foolproof, because handicapping is still involved, there have been successful bettors throughout history who have applied this system. This is not to be confused with what constitutes a Dutch book which is when a bookmaker goes overbroke (the opposite to overround).
Contents
- When will dutching be profitable
- Worked examples
- Example 1 an unprofitable two way arbitrage
- Example 2 a profitable two way arbitrage
- References
It is thought the strategy behind Dutching was originally conceived and employed by Arthur Flegenheimer (also known as Dutch Schultz) alongside various rackets he had running at the racetrack. The system has since taken his name.
The strategy can pay dividends when gamblers successfully reduce the potential winners of an event to a select few from the field or when information about runners not expected to perform well does not reach the market (so as to affect the odds), making it profitable to back the rest of the field.
Dutching can also be used to reduce the price of the commission you would pay at a betting exchange by dutching at two bookmakers (normally Asian style) instead.
When will dutching be profitable?
A Dutch or an arb is profitable if the sum of the reciprocals of the decimal odds of each selection is less than 1.
Additionally, the profitability of a Dutch/arb can be expressed as 1-R, where R is the sum of the reciprocals.
In practice, bookmakers will always ensure that R is comfortably greater than 1, to generate a profit for themselves and to negate the effect of any slight arbitrage possibilities between different bookmakers.
Worked examples
The simplest form of market to Dutch is two-way, such as a tennis match or a game of football, but any number of runners can be dutched. These examples are based on betting on goals scored in a football game.
Example 1 - an unprofitable two-way arbitrage
Sum of reciprocals = 1/(decimal odds at Bookmaker 1) + 1/(decimal odds at Bookmaker 2) = 1/2.1 + 1/1.8 = 0.476 + 0.556 = 1.032
Therefore, this would give a loss of 3.2% (1 - 1.032 = -0.032) of the total stakes, so these odds not profitable.
Example 2 - a profitable two-way arbitrage
In the same situation as above, another bookmaker (Bookmaker 3) is offering odds of 1.95 on the Under 2.5 outcome (unlikely).
Sum of reciprocals = 1/(decimal odds at Bookmaker 1) + 1/(decimal odds at Bookmaker 3) = 1/2.1 + 1/1.95 = 0.476 + 0.513 = 0.989
Therefore, this would give a profit of 1.1% (1 - 0.989 = 0.011) on the total stakes.
Dutching calculators that perform the arithmetic are freely available on the internet for the benefit of those who cannot do basic arithmetic.