Being the bookmaker

Ok, so the title is a little inaccurate, but for most people laying the bet is similar to acting as the bookmaker, though as we are not actually making a book we aren’t technically being a bookmaker.

Anyway, last time I said that just laying the no hopers wasn’t perhaps the best quick and easy option to making money it may seem at first.  To try and explain this I shall make up a fictitious book with 6 selections.

Team	Odds
New York Rangers	1.10
Toronto Maple Leafs	1.25
Sheffield Steelers	15
Guildford Flames	50
Fife Flyers	100
Nottingham Panthers	250

Anyone familiar with ice hockey will recognise the teams above and know that either New York or Toronto would easily win this league, but which of those two it will be is a little less certain, so we decided to lay the other four teams knowing they have no chance (if you don’t know anything about ice hockey trust me on this).

On the betting exchange some people are taking a wild punt and they are wanting to back Sheffield, Guildford, Fife and Nottingham. This is important, on betting exchanges bets must be matched, so if you want to lay a bet for a certain amount at certain odds, there must be someone (or people) wanting to back the bet at the same amount and odds.  If you tried laying Nottingham at 2.5, it wouldn’t get matched while people can get odds of 250.  Think about it, would you back a team at 2.5 if you could get 100 times that!

So we lay £1 on Sheffield, Guildford, Fife and Nottingham. So if Sheffield win we lose £15, Guildford £50, Fife, £100 and Nottingham £250.  As only one team can win we don’t need to cover all these liabilities combined, just the biggest one.  So for this we need to have £250 in our betting bank and the most we can win is £4.  That £250 is then tied up until the league is over.

So you can see the problem, to lay things like this requires a much larger betting bank that I am using for this experiment.  However, if you are using a much larger bank, it is worth thinking about this as an additional option to help increase your returns.  With this example it is about the same as backing at odds of 1.02, pretty common for what I have been doing in this experiment.  So if you have a bit more to play with, you can make steady if unspectacular long term returns with very little risk.

Hopefully this gives you a bit of an insight in to betting exchanges. I plan on coming back to them at a later stage, as they present some very good opportunities for making money, which don’t form part of this experiment, but could be used in another experiment at a later date.