How does all of this fit into gambling markets?
Just a few years ago someone named Andrew Black, who used to trade on the Stock Market, buying and selling shares, had the idea of applying the principles of his profession to gambling. He believed, that instead of punters being restricted to a oneway gamble (“Backing” to Win) with the traditional high street Bookmakers, it was possible to put people in touch with each other to enable them to buy and sell betting odds. His idea was to setup a Betting Exchange. Although there are now several of these exchanges to be found on the Internet, by far the biggest is Betfair~ the brainchild of Andrew Black.
This person wishes to BACK a contestant to WIN and wants to place a bet of £100 at odds of 5.5
This person wishes to LAY a contestant to LOSE and is willing to take up the bet of £100 at odds of 5.5
He is effectively acting as a Bookmaker.
This person is the intermediary (The Betting Exchange). The Betting Exchange is bringing the BACKER and the LAYER together to strike a bet and will safely keep agreed bet funds in a Bank Deposit Account, until the result of the bet is known.
He will take £100 from the BACKER and £450 from the LAYER until the result of the event is known. If the BACKER WINS, the Betting Exchange will transfer £550, less a small commission % (maximum of 5%) ,into her account. This £550 is made up of winnings of £450, which the LAYER has had to pay out, and her original stake money of £100. The LAYER does not receive anything back into his account. If the BACKER LOSES, she has nothing deposited back to her account, but the LAYER gets to keep the £100, less a small commission %(maximum of 5%), put up by the BACKER, and this amount is duly deposited into his account together with the “collateral” of £450 he had to deposit with the Betting Exchange for safe keeping.
On this occasion, this person wishes to LAY a contestant to LOSE, effectively acting as a Bookmaker, and wants some one to place a bet of £20 at odds of 2.5
This person is willing to place a bet for £20 at odds of 2.5
This person is the intermediary (The Betting Exchange). He is bringing the BACKER and the LAYER together to strike a bet and will safely keep agreed bet funds in a Bank Deposit Account,until the result of the bet is known.
He will take £30 from the LAYER and £20 from the BACKER until the result of the event is known. If the LAYER WINS, (i.e. the contestant LOSES) the Betting Exchange will transfer £20, less a small commission %(maximum of 5%), into her account. She is keeping the stake money placed by the BACKER. The BACKER does not receive anything back into his account.
If the LAYER LOSES, (i.e. the contestant WINS) she has nothing deposited back to her account, but the BACKER will have winnings of £30, less a small commission % (maximum of 5%), plus his stake money deposited to his account.
The purpose of this manual is to explain the principles of trading in odds by bringing BACKING and LAYING together to generate “no lose” and “guaranteed profit” situations.
There are various aims when trading odds which will be explained in turn. Throughout this manual the basic principles will be explained through horseracing examples and it will then be in your hands how far you wish to apply the knowledge gained to the market(s) you wish to enter. You may have specialised knowledge in a particular sport, which will help you to judge which way a market is moving, and as you will learn later, this can be more valuable than trying to pick winners or losers.