SP stands for starting price and is calculated by Betfair in the moment when a horse race commences. All UK and Irish races (and some US ones) have an SP. The SP price is calculated to try to match at the fairest price, all those bets that want to be guaranteed to get matched as the race starts.
In my opinion, it is not really essential to understand exactly how Betfair calculates the SP, but if you want to read more then here is a link:
http://www.betfair.com/help/Help.SP.Betting/
What is the difference between a placing an 'SP bet' and placing a normal bet with 'Take SP' set on?
If using the Betfair website, bets can be placed as either normal exchange bets, or SP bets. SP bets, are not the same thing as normal bets that are placed with the 'Take SP' setting, its sounds a little confusing, but I'll try to explain below.
SP bets are special, once placed they cannot be cancelled (even before the race starts), they are locked to the SP system as soon as your place them. Whereas, normal exchange bets can be placed with 'Take SP', these can be cancelled or modified before the race starts, but they are set to take the SP price as the race commences, if they have not been matched already during normal pre-race trading.
I am not going to discuss 'SP bets' any further, I want to talk about normal exchange bets with 'Take SP' turned on.
What happens when I place a bet with 'Take SP'?
For normal exchange bets placed before the race starts, you can decide what happens to them when the race starts (cancel, keep or 'Take SP'). If you select 'Take SP' then your unmatched bet will be matched at the SP price as the race commences.
This is a good way to ensure that your bet will be matched at a fair price.
What are the benefits, why would I use Take SP, for example with the robot?
Imagine you are using a robot (like the one in the Cymatic ladder), it places a back and a lay bet simultaneously, trying to win 1 tick of profit if both bets are matched. Lets also assume that you have ticked 'Take SP' in the main window, so both bets will be issued with 'Take SP' set on. So if only one bet gets matched before the race, then the other bet is certain to get matched as the race starts by taking the SP price. This will probably mean that you end up making a small loss, but at least you got bets matched on both sides of the market, effectively meaning that your position has not been left heavily exposed to one outcome.
So yes, if you have to take the SP, you'll probably make a loss, because if the second bet was unable to get matched at the price you originally wanted (to earn 1 tick) meaning that price has probably moved against you and the SP has probably moved in the same direction too (although occassionally you will make a profit at the SP, but not in the majority of cases in my experience).
Reducing your eventual exposure in this manner is one benefit to using Take SP.
There is a second benefit. If you send the bets as Take SP, then you might also be willing to not use a stop loss because you know that you'll get the SP later on if necessary. Of course, there are risks to doing that, but it can enable you to ride a noisy market rather than suffering the frequent pain of watching your stop loss get hit only to see price then turn around and come back to the area where you would have made a profit.
So, if you are willing to take the risk of an unknown loss, you might find success in using the robot with no stop loss (or a very wide stop loss) and simply relying on Take SP to ensure that your position ends up with a reasonably low exposure as the market goes in-play.
I am not making a recommendation to do anything mentioned above, since I can't know your appetite for risk, but I hope this information helps some people to better understand what 'Take SP' means and gives some ideas for you to consider using in your own trading.
Happy trading,
Gavin
