Free bets are a type of reward offered by bookmakers to encourage punters to bet with them in what is a very competitive market. In most circumstances they are the reason we can make money.
When people first start off with matched betting they usually grasp fairly quickly that they can back with a bookie and lay with the betting exchange and that these two actions will cancel each other out whatever the result. They also understand that by doing this they have earned themselves a free bet. What is harder to grasp is how that free bet is turned in to real cash….
Taking the Coral sign up bonus as an example we bet £5 on Liverpool to win at decimal odds of 3 (2/1 in fractional odds). Ignoring commission for a second we can lay £5 on Liverpool at the betting exchange odds of 3 to hedge our first bet. The result of this is that your total cash balance across the two accounts is the same as before you placed any bets but you have a bonus £20 of free bets in the Coral account.
Now the only thing you have gained is £20 of free bets, this can’t yet be withdrawn so you need to bet it again to release it. As the graph below illustrates, higher odds give you better returns on these free bets as the stake is not returned (if you were to bet on a dead cert at odds of say 1.2 you would receive only £4 back from your £20 if it won and nothing if it lost. We aim to release around 70-80% of the free bet so we are looking at odds in the sweet spot shown.
If you place this £20 free bet on Newcastle to win at odds of 6 (5/1) your return will be £100 (not £120 as with a normal bet as the stake is not returned). If Newcastle don’t win you will get nothing so in order that we guarantee ourselves a return we again use the betting exchange to extract a guaranteed reward for our efforts.
If we lay Newcastle at odds of 6 on the betting exchange we can guarantee ourselves just shy of £16 from the free bet by using the bet calculator. The calculator tells us to lay £16.81 and that if our bet wins at Coral we will end up with a profit of £15.95, If the bet loses at Coral our profit will be £15.97 so we really don’t care what the result of the match is.
To illustrate this;
If the Coral bet wins you end up with £100 winnings at Coral and a £84.05 loss at Betfair – Profit = £15.95.
If the Coral bet loses you end up losing nothing at Coral (the free bet just disappears) and winning £15.97 at Betfair – Profit £15.97.
Types of free bet
They come in two general types, the most common is a ‘Stake Not Returned’ free bet. These disappear in to thin air after you have placed them so if your bet wins you only receive the winnings back, not the stake. So if you place a £10 free bet on a horse at evens (decimal odds 2.0) and it wins you will receive £10 winnings whereas your return would have been £20 with a normal cash bet as you would also receive your stake back. For this reason you are better off placing free bets on higher odds as the return is better. The graph below illustrates this…
The other main type of reward is bonus or promotional cash. This usually has a restriction on it to prevent it being withdrawn until you have bet a certain multiple of the bonus cash. For example a wagering restriction of x3 on a bonus of £20 would not be withdrawable until you had placed £60 of bets and it may also have a time limit after which it is withdrawn along with any winnings.