What is a Betting Exchange?
Sports trading on a betting exchange is very much like trading traditional markets, where you can buy and sell financial assets. The only difference is that the ‘asset’ or ‘commodity’ is sports.
On a betting exchange, the odds are set by the bettors, not by bookmakers. So it is the betting public who decide what they are prepared to ‘pay’. By default, therefore, a sports trading market is created where you can ‘back’ (bet on) a team / individual / event as you would in a traditional bookmaker or ‘lay’ (bet against) a team / individual / event, which is more like being a bookmaker. With the latter essentially you are saying: “I bet that horse won’t win” or “I bet that team won’t win”. Of course there is an associated cost / payout if the horse / team do win.
The odds on an exchange are much more competitive than you would find at the majority of bookmakers because the odds are set ‘by the people’. The ‘book percentage’ is much closer to 100% than at the bookmakers. This essentially means that the bookmakers aren’t taking out a chunk of commission from the market.
The other big advantage is that because you can ‘buy’ and ‘sell’, a dynamic environment is created where you have a lot of flexibility. The ability to hedge and arbitrage, essentially this is sports trading.
The betting exchanges do charge commission on winning bets but prices are still competitive. Also, you can choose whatever stakes you want. You are only limited by the volume on a particular event. If you want to bet £500k on a high volume event like the World Cup or Champions League, then you can, quite easily.
We’ll go through a few examples:
A typical market layout on an exchange can be seen below. Here we a are looking at a game between Liverpool and Wolves.
To back you would click in the blue box / left hand box to lay you would click in the pink box / right hand box.
You can see that there is over £63000 available to bet on Liverpool.
If you wanted to make a £100 bet on Liverpool, click the blue box and fill in the stake / slip. It will look something like this below. Hit ‘Place bets’ and your bet is on.
Let’s say you thought it was unlikely that this game would end in a draw. You could decide to bet against or ‘lay the draw’ at 6.4 decimal odds (close to 11/2).
Note your liability (in red) if the game does end up a draw! But you do have both Liverpool and Wolves ‘on your side’.
The bet slip for this bet would look something like this below.
A quick note on commission: In the examples above, you will see that profit figures in green have commission already deducted. The commission on this account, which is effectively a demo account, is around 5% – so £100 in potential winnings shows up at around £95 after commission is deducted. Commission on the exchanges tends to range from 1% – 5% depending on the exchange and volume bet / profit made).
Lay betting can be particularly effective in horse racing where you can lay one horse and have the rest of the field ‘running for you’. Take a look at this example below, where we are looking to lay Thomas Crapper for £100.
We would make £100 if any horse other than Thomas Crapper wins the race. If Thomas Crapper wins the race, then we would lose the bet and have to pay out £1250.00.
Asking for a Price
Going back to our football match between Liverpool and Wolves, you can also ask for a price on the exchanges and potentially get even better odds. Let’s say you wanted to bet on Wolves.
Rather than bet at 11.5 (the current back price) you could try to back at better odds of 13.0. Effectively your bet now sits on the Lay side (pink) – to the right where you see odds of 13.0, where it will wait to be matched.
Note: If you asked for odds of e.g. 20.0, then your bet would still go into the market but would just not be visible on the standard exchange screen which generally only shows three back and three lay boxes.
If the bet is taken, potential winnings are increased from £1050 (at the available odds of 11.5) to £1200 (before commission) at odds of 13.0. The bet could be matched in the lead up to the game as prices fluctuate or you could take the bet ‘in play’. The bet could be matched at 13.0 quite quickly, if Liverpool start the game well.
What is Sports Trading?
Hedging and Arbitrage
One of the most powerful aspects of the exchanges is the ability to hedge and arbitrage. Sports trading. This can take place prior to the start of an event or during an event (in-play).
In our game between Liverpool and Wolves, if you thought that Wolves might hold Liverpool to 0-0 for a substantial period of the game – you could bet against Liverpool with a view to backing them later on as their price drifted.
Your first bet would be the £100 lay on Liverpool at 1.34, for a liability of £34. Later in the game, as the Liverpool price drifted in the market, you could eliminate the £34 liability by backing Liverpool for e.g. £43.60 at odds of 1.78.
The effect would be as follows:
You make less money on Wolves and the draw – (originally £100 before commission from your lay of Liverpool) but if Liverpool go on to win the game, you would lose nothing / make 1p.
You can take our above example a step further and actually profit whatever the outcome by backing more on Liverpool at the price.
Instead of backing Liverpool for £43.60 at 1.78 as in the above example, we increase our back stake to £75.28.
The effect is as follows.
We now stand to make £24.72 whatever the outcome of the game.
We hope this has given you an idea of what can be achieved on the betting exchanges. They offer huge flexibility and many betting and sports trading opportunities across a range of markets.
For an overview of the best betting exchanges click here.