Terminology - Overlays vs Underlays

[mick]

I've always found the terms "overlay" and "underlay" interesting. In our pari-mutuel world of American betting, they are somewhat obscure. If we were in Great Britain or even New Jersey, with bookmakers or betting exchanges, however, the terms would be easier to understand.

Assume we are at Ascot and a bookmaker's line is 5-1 on Tennessee Stud. In other words, he's offering or "laying" out those odds to all takers. Further assume that I think 5-1 on Tennessee Stud is a good bet. (Of course, with that name, I'm somewhat prejudiced.) So, I "take" the bet at 5-1. Thus the terms "laying" and "taking" a bet. It's another way of saying offering and accepting a proposition.

Viewed monetarily, the bookmaker is willing to risk 5 of his dollars for 1 of mine that the horse loses. On the flip side, I'm willing to risk 1 of my dollars for 5 of his that the horse wins.

And that brings us to the terms "overlay" and "underlay." If I think the horse's fair odds are 3-1, then the bookmaker's odds are OVER my estimation. So, Tennessee Stud is an overlay at 5-1.

If instead the bookmaker's odds on the horse are 2-1, that would be UNDER my estimation of fair odds and Tennessee Stud would be an "underlay."

And yes, there was a Tennessee Stud according to Johnny Cash, although I doubt he raced at Ascot.
https://www.youtube.com/watch?v=b_X_SWuwM7k