Betting exchange question

[Hurco]

Hi everyone, 

I have a newbie question about betting exchange strategy. I do normal bets since years but first time i wanted to try with exchange. I just can not understand the exact difference on it. 

Lets say i go lay bet to to a score 0-0 and lets assume that odds are 4.00. I place 10 units and liability is 30 units so i risked 40 to get 10 units back. 

So in a normal bet platform i can go for backing 0.5 over when it is 1.25 and i can place 40 units again to get 10 units back. What is the reason that makes people playing exchange? This question can be silly but i really need to understand basics of it. Thanks. 

[froment]

Hello, Hurco; welcome to the forum!

Your question is not silly; while they say that people are born with natural ability to swim, and then they lose that ability within first weeks of life, I highly doubt we are born with natural knowledge of betting exchanges, so some of us have to ask it sooner or later. I mean, all of us in this forum had such a question.

With your example, there is indeed not difference between exchange and "normal bet platform". However, betting exchnage offers you a possibility to trade your bets: to place the opposite bet before the event ended, so you lock in a profit - or, more usually, in a loss - regardless of final outcomeof the match.

Let's see how; in your example, you laid 0-0 at odds of 4.00 (insanely good odds for laying 0-0, if you ask me) with stake of 10 units, and liability of 30 units.

Odds for 0-0 tend to shorten during the match, untill they reach 1.01 in closing moment. After quarter of an hour of play, you're dissapointed with performance of your team, so you decide to trade out. By that time, odds have shortened to 3.50.

You place the opposite bet now: you back 0-0, with stake of 11.43. So, you're risking 11.43 units to win 28.58 units.

If they manage to find their way to net, you win 10 units from lay bet, and you lose 11.43 units from back bet; net loss 1.43 units. If, however, no goal is scored by the end of the match, you lose 30 units from lay bet, and you win 28.58 units from back bet; again, 1.42 units net loss. So, you were able to trade out when you saw that match does not develop as you expected, and instead of losing 30 units, you lost only 1.24 units.

Let's say that you laid the draw, at odds of 3.00, with stake of 10 units, so liability is 20 units. The goalkeeper has bad day, so there is a goal minutes into the match, and it sends draw odds to 8.00. Now, you back the draw, with stake of 3.75 units, for possible profit of 26.25 units.

If match does not end in draw, you win 10 units from lay bet, and lose 3.75 units from back bet; net profit 6.25 units. If bad keep team manages to claw back to the draw, you lose 20 units from lay bet, and you win 26.25 units from back bet; net profit again 6.25 units. Thus, you were able to lock in profit after first goal, regardless of how the match will develop further.

That example is known as "lay the draw" strategy; once profitable, it is worn out nowadays, and it is not easy to take profit from that.

This works the same way if you first place the back bet - you need subsequently to place lay bet, or you can trade more than once during the same match - place more than one back bet or lay bet at different odds; if back odds are higher than lay odds, you make profit, otherwise, you make loss.

Stakes above are calculated using formula:

Back stake * Back odds = Lay stake * Lay odds

and it does not incorporate comission at betting exchange, you need to deduct it from your winnings; Betfair has 7% basic commission.

Now, bookmakers started offering "cash out" option, which is very similar to this trading, as long as your bet still has the ability to win. Once it is losing, of course they won't offer you possibility to decrease your losing stake.

Hope it was understandable... Good luck with your trading!