What is laying a bet?
“I bet you can’t jump over that”; “I bet you won’t eat all that”; “They’ll never win in this weather.”
We all make statements to friends like this every day. What we’re actually doing is ‘laying a bet’: betting that something won’t happen.
Betting Exchanges have made lay betting possible.
For example have you ever thought the odds on Serena Williams were way too short (low) to win an event, but couldn’t decide who was going to win the tournament?
Problem solved – by laying Williams, you are effectively backing the field to beat her. You can now cheer the whole field!
Like anything too good to be true, there is a catch. Should your selection win, you’ll pay the backer his winnings, which could be a lot more than the stake.
When there are only two possible outcomes, such as with a tennis match, betting on one side is exactly the same as laying the other option.
How do the odds work for laying?
Think about these two everyday scenarios – flipping a coin and rolling a dice.
You and your buddy each put a tenner on the coin toss. One calls Heads, the other gets Tails, and whoever wins gets £20.
You backed Heads for £10 to win another £10. The odds you received were evens or 2.
Or looking at it another way:
You laid Tails. You let your buddy have £10 on Tails to win another £10, at odds of 2.
Either way, if it lands Heads, you win a tenner, if it lands Tails, you lose a tenner.
In a two-horse race, backing one side means you are laying the other.
So what happens when the odds aren’t even, or there are more than two options?
Think of a standard dice (or die). Pick a number. Your buddy will pay you every time it lands on six.
What odds should it be?
It can’t be evens or 2, because that’s not fair – you’ve got much more chance of losing than winning.
Chances of winning – one
Chances of losing – five
The true price of this bet is five to one, or in decimals, 6 (potential profit plus your stake).
So your buddy agrees to pay you the true (fair) price if you roll a six. You put down £1, he risks £5.
If your price is 5/1, what price is he getting for his bet?
He has five chances of winning, and only one chance of losing. So the odds are 1/5 or in decimals, 1.2.
So you just ‘flip the fraction’ to work out the other side of the bet.
True odds (such as 5/1 v 1/5) represent an efficient market
This occurs when all the money going into the market equals all the money being paid out in the market – there is no leakage or profits being taken.
Efficient betting markets rarely exist outside of betting exchanges – bookmakers need to reap a profit in order to run a business.
Betting exchanges make their money by taking commission from winning bets.
Successful betting all comes down to weighing up the risk versus the reward.
Laying at 2 will win you more if you are correct, but it is more likely to happen than laying at 6. But laying at 6 will cost you more should that result occur.
Backing at 2 is more likely to happen, but you won’t win as much compared to backing at 6. And if you have bet to win a certain amount, then backing at 2 will cost you more if the selection doesn’t win.
In an efficient market you should end up level of the long term. To beat the market you need to find an edge.