4. Lay / Laying
Laying will probably be a new concept for you, however this feature introduced by the betting exchange makes it an incredibly powerful tool for those who know how to use it. In the last tutorial we explained that the betting exchange model combines two very different disciplines, namely betting & financial / stock exchange. We also explained that backing is both placing a traditional bet, and also selling a commodity at a price. It is therefore logical that Laying is the exact opposite to backing.
Again, this term is explained from two points of view:
The word Lay is the general name for an action taken on a betting exchange, and is derived from the following concepts:
- Bet against something to win. (from betting)
- Buying a commodity. (from the financial exchange)
Bet against something to win
Each bet is trade between two counterparties - one party wants an outcome to happen (Back), the other wants the outcome not to happen (Lay). When you place a bet with a traditional bookmaker you are the backer, and the bookmaker is the layer:
- Bettor – Places a bet on a result they think will happen, and wants to win. (Backer)
- Sportsbook – Advertises a price for the event outcome, accepts the bet from the bettor and pays out if successful. (Layer)
Both the bettor and bookmaker have made a bet with each other – they did a trade. The Sportsbook has taken the Lay side of this trade, and accepts the bet at the lowest price possible. The lower the price the bookmaker manages to agree with the bettor, the less money it will have to pay if the bettor wins.
Buying a commodity
The basic rule of business is to sell something for more than you paid for it. As such when trading the idea is to buy low and sell high, which if successful will make you a profit. As we said in the previous paragraph, you should lay low to earn as much as possible, so from the perspective of trading and financial exchanges, it means that the Lay is the term for buying a commodity.
Goodbye bookmaker!
In the days before betting exchanges, Laying was a privilege only for bookmakers. So other than bets between friends, no one other than a licensed bookmaker could be on the lay side of a bet / trade. Betting exchanges have changed this fact, so now being a Layer is as simple as being Backer. In effect betting exchange works like betting between friends on a global scale, bringing together Backers and Layers and as such excluded the bookmaker from the process. Counterparties on the betting exchange are as follows:
- Punter (Backer) - who wants the result he bet on to happen. The Layer will pay his winnings.
- Punter (Layer) - who thinks the opposite and wants to collect Backers stake.
Being a Layer
Being a layer is a new thing for a lot of people and sometimes a difficult concept to grasp. However it's the exact opposite of Backing. Let me also explain a little maths for both features of betting exchange:
Back
- When you back, you will win if the result that you backed happens. Winnings depend on the size of your deposit and the price in which you bet. Win = (price – 1) * your stake.
- When you Back, you will lose if the result does not happen. Your Loss = your stake.
Lay
- When you Lay, you will win if the result does not happen. Your winning depends on the backer’s stake. Your win = Backers Stake.
- When you Lay, you will lose if the result you have Laid happens. Loss depends on the size of your deposit and the price in which you bet. Loss = (price – 1) * your deposit.
Maybe you feel that this information is constantly repeated. However you cannot successfully make money by trading bets on a betting exchange unless you fully understand the basic concepts.
In the next article we will look at the principle of trading itself and way how to ensure a win, whatever the result of a sporting event.
