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When you place a sports bet with a bookmaker, you typically ‘back’ a team or player to win or draw.
Betting exchanges are different because they allow you to act like the bookmaker. This means that as well as being able to ‘back’ a team, player or event to win, you can also ‘lay against’ a particular outcome.
For example, in a football match where Portsmouth meet Aston Villa, you might choose to back Portsmouth by placing a bet that they will win. In a Betting Exchange, the bet you place is not accepted by the bookmaker, but by another better, who chooses to ‘lay against’ Portsmouth. This means that if Portsmouth win, the person ‘laying against’ will pay you your winnings, but if Portsmouth lose, they will keep your stake.
Here is a full running example showing the relationship between the person ‘backing’ and the person ‘laying’:
The odds | ||
Portsmouth 3.4 | Draw 3.4 | Aston Villa 2.42 |
| Bet on Portsmouth with a £10 stake |
|
|
| Lay against Portsmouth with a £10 |
|
¦ |
|
¦ |
|
¦ |
|
¦ |
Portsmouth win |
| Portsmouth lose or draw |
| Portsmouth lose or draw |
| Portsmouth win |
¦ |
| ¦ |
| ¦ |
| ¦ |
Return = odds x |
| Loss = |
| Return = stake |
| Loss = |
¦ |
| ¦ |
| ¦ |
| ¦ |
Return = (including original stake) |
| Loss = |
| Return = |
| Loss = (including return of original stake) |
¦ |
| ¦ |
| ¦ |
| ¦ |
Net Profit = |
| Liability = Stake |
| Profit = |
| Net Liability = Loss – Stake |
¦ |
| ¦ |
| ¦ |
| ¦ |
Net Profit = |
| Liability = £10 |
| Profit = |
| Net Liability = |
It is worth noting, however, that commission charges levied by the exchange facility are not taken into account in the above example. Generally, if a person makes a profit on a bet, they have to pay a small commission. The percentage varies from exchange to exchange and from market, but you only pay commission on net profits, and never on losses.
A key advantage of betting on exchanges is the ability to lock in profits by betting in the other direction when odds change. For example, if you bet £10 on Portsmouth at 3.4 and later saw that the price had fallen to 3.0, you could lay against Portsmouth for £10, and thus lock in a profit whether Portsmouth win or lose.
In conclusion, betting exchanges offer a unique opportunity to ‘play the bookmaker’ but liabilities, including exchange commission, must be carefully calculated before every bet to ensure your profits are protected.