Betting exchanges have been around since 2000 but many novice sports punters, particularly those based outside of the United Kingdom and Ireland, have been reticent to use them because, mistakenly, they think that they are complicated.
Whereas bookmakers offer odds and punters bet against the bookmaker, betting exchanges provide a market place in which punters determine the odds and bet against their peers.
Punters who play with bookmakers can only back outcomes. However, punters who play with betting exchanges can not only back outcomes as they would with a bookmaker but also lay outcomes, assuming the role of the bookmaker in the transaction and enabling one of their peers to take their offer.
Laying the Odds
It is the concept of laying that freaks out novice sports punters so here is an example to explain how it works.
Example: Consider a hypothetical football match between Liverpool and Everton in which bookmakers are quoting decimal odds of 1.85 about the Reds, 4.50 about the Blues and 3.30 about the draw for a bookmaker margin of 1.066.
The odds on the world’s largest betting exchange, Betfair, would be different. For starters, the bookmaker margin on both the back and lay sides of the equation would be lower than 1.066 because of the market place’s competitiveness. That means punters who want to back outcomes are, more often than not, better off doing so through a betting exchange than with a bookmaker, even though they will have to pay a small commission charge on any successful bets that they place.
Where betting exchanges come into their own, though, is the power that they give punters to lay outcomes. For example, a punter may not fancy Liverpool and, rather than backing Everton and/or the draw, wish to lay the Reds at, say, decimal odds of 1.90. The punter can set the stake that they are willing to accept on Liverpool at their nominated odds and use the betting exchange to find one or more suitors.
Before betting exchanges, punters who did not fancy an outcome had to back all of the other options. So, continuing the example, the anti-Liverpool punter would have had to back both Everton and the draw, obtaining decimal odds of around 1.90 by staking to return the same amount regardless of the result. Now that punter can lay Liverpool at decimal odds of 1.90, which is the same as backing Liverpool not to win at around 2.11. Not even commission charges can erode that difference in value.
More Outcomes = More Possible Bets
Betting exchanges are excellent for punters who want to take a stand against one or outcomes in a sports event, particularly those in which there are three or more options. That is why lay betting has taken off in the sport of horse racing.
Also, betting exchanges provide punters with brilliant trading opportunities that do not really exist with bookmakers. For example, a betting exchange punter could back Matt Kuchar at decimal odds of 51.00 to win the Masters Tournament and, following three of the four rounds, find the American two shots ahead of the field and trading at 3.00. That punter could decide to let the bet ride or lock in a tidy profit by laying Kuchar at his new odds.
Examples of Sample Bets
Say that the punter invested $100 at decimal odds of 51.00 and, therefore, stands to make $5,000 if Kuchar wins. The punter could take many courses of action but here are the most common approaches (note that, in the interests of simplicity, these calculations exclude any commission charges):
1. Do nothing
Kuchar wins = +$5,000
Kuchar does not win = -$100
2. Protect original stake by laying Kuchar for $100 at 3.00
Kuchar wins = +$4,800 ($5,000 minus $200)
Kuchar does not win = 0 (-$100 plus $100)
3. Guarantee the same profit regardless of result by laying Kuchar for $1,700 at 3.00
Kuchar wins = +$1,600 ($5,000 minus $3,400)
Kuchar does not win = +$1,600 (-$100 plus $1,700)
4. Side with the field by laying Kuchar for $2,500 at 3.00
Kuchar wins = 0 ($5,000 minus $5,000)
Kuchar does not win = +$2,400 (-$100 plus $2,500)
In summary, betting exchanges are really not that difficult to use and they offer such terrific value that every sports punters should have an account with at least one.