The Back and the Lay

Trading on betting exchanges has been around a long time, but is probably in decline because of the perceived complexity, and lack of competition meaning that the monopoly site can keep commission charges high.  The promise over traditional bookmakers is more competitive prices, the betting site is just sitting as a middle man taking a commision on winnings and has no stake in the event outcome.

It is still an interesting thing to look at to understand the concepts.

If we have a backing bet of B and a lay bet of L at decimal odds of O_b and O_l respectively then the profit P made is:

Selection Wins:

          P =  B*O_b - L*O_l


Selection Loses:

         P = L - B

The idea with trading is to back and lay during the lifetime of the event so that you build a profit if the selection wins or loses.

So the conditions for P > 0 are:

       L > B    - i.e. your lay bet stake must exceed your back stake

     B*O_b > L*O_l  - i.e your bet odss/stake must exceed your lay odds/stake

The conditions for the value of P being some sought after profit margin after first backing, now if the offs O_l are available:

    L = B + P  - builds in P as a profit on selection win

    L = (B*O_b - P ) / O_l &nbsp - Tells us lay stake needed to profit P at the lay odds