You may have heard about betting exchanges and never had the time to find out more, or you may have witnessed one of the myriad of TV adverts created by a particular company (cough Betfair cough) promoting their service.
So what is all the fuss about?
What is a Betting Exchange?
A betting exchange brings together two punters: a backer and a layer. With traditional sportsbook betting, a bookmaker sets their odds according to strict in-house guidelines which features a built-in profit margin so that – in the vast majority of cases – the bookie would not be bankrupted should the most extreme scenario occur. Punters then place their bets, cross their fingers and hope for the best.
With a betting exchange, things are slightly different. Both parties in such a transaction are ‘human’; the layer is able to set their price on an event NOT to occur, and the backer then places their wager on the event to occur.
Here’s an example:
Manchester City to win the Premier League title 2016/17.
There may be somebody out there who really fancies somebody else – maybe an Arsenal or a Manchester United – to win the title. They would be tempted to then lay Man City, e.g. bet on them NOT to be crowned champions, at a price they deem appropriate. In this instance, the layer offers 3/1 to other members of the exchange.
Because that’s the key thing to note about betting exchanges: the layer can set their odds at any price they want.
The best prices are displayed on screen, and if an individual is confident that Manchester City WILL win the league then they can take up those odds of 3/1 prescribed. The bet is ‘matched’ and both backer’s stake and the layer’s liability (the maximum amount they could lose) are taken from their respective accounts.
Should Man City ultimately prevail, the backer wins at 3/1 – although a small commission is paid on all winning bets via an exchange.
Should Man City finish second or below, then the layer thrives: he pockets the lay amount (the same as his or her original stake).
Tips for Leveraging Profit
Now you have an understanding of how the exchanges work, the cogs are probably whirring as to how you can take full financial advantage. Here are some tips that should help guide your next move:
Strategy #1 – Basic Backing
You could simply utilise the better odds found on the exchange to continue betting in your ordinary way.
So if you normally just back Team A to beat Team B, then why not give the exchanges a try; you are almost guaranteed to get greater odds on these peer-to-peer sites, and you only pay commission on winning bets at around the 5% mark.
Strategy #2 – Basic Laying
Another option is to lay a team that you don’t think will win; in this way, you have a 66% chance of your bet being successful (the other team could win or the match could end in a draw).
You can try basic laying in two ways: lay complete outsiders for almost guaranteed profit (but remember this will increase your liability), or you can lay favourites who you think are overvalued/under-priced.
Strategy #3 – Back to Lay
A firm favourite with exchange bettors, this is a great option when you have backed a selection and then you see its price fall. For example, Leicester City started last season as 5000/1 shots to win the Premier League. If you had backed them – and then got cold feet around Christmas time – you could then lay them at around the 100/1 mark.
This would cut into your own profit margin of course, but at least you are guaranteed a profit no matter what happens.
The key to successful back-to-lay betting is in finding long priced selections of genuine value. A golfer with an agreeable tee time on the first day will see their price fall dramatically should they perform well.
Strategy #4 – Lay the Field
A classic exchange strategy to try when you strongly predict a favourite to win is to lay the rest of the field.
So let’s use the Premier League champion 2016/17 market as our guide again, and assume you believe Man City will win the title. That means you would lay the other 19 teams in the division, and in our example below we are using stakes of £5:
Man United 9/2 (total liability = £22.50); Arsenal 6/1 (total liability = £30); Chelsea 7/1 (total liability = £35); Spurs 8/1 (total liability = £40); Liverpool 9/1 (total liability = £45); Leicester 33/1 (total liability = £165); West Ham 100/1 (total liability = £500); Everton 125/1 (total liability = £625); Southampton 150/1 (total liability = £750)….
….and so on, right through to the complete outsider West Brom at 1500/1 (total liability = £7,500).
If Man City did win the league, then you would win 19 x £5, which equals £95. If we refer to the above data, should any team from Liverpool upwards in the betting win then we would still turn a profit after paying out the necessary winnings.
If any team from Leicester downwards won we’d be in big trouble; and given that the Foxes did just that this season, the risks for layers are obvious. But if we treat that victory as a mere statistical anomaly, then we can see the profit potential in bulk laying in such a way.
Strategy #5 – Cover Betting
You can achieve this with normal sportsbook betting too, but given the slightly inflated prices that are available on the exchange the options available are greater here.
Say you have bet on Arsenal to win the FA Cup at 8/1. They reach the final, and are suddenly 8/13 to lift the trophy. You could lay them as described above, or what is probably a more financially viable alternative would be to back their opponents in the final too, and have a small wager on the draw. This sequence would then cover for any eventuality.
