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What's Trading?

Trading


Trading consists in making two opposite bets with the purpose of winning money with the variation of their value.

 

Complicated? Not at all!


It’s just like the stock exchange, when you place a Lay bet (betting against the draw for example) you’re buying a share.

When you place a Back bet (betting in favor of the draw for example) you’re selling a share.

Logically,you will win money if you sell at a higher value than you bought.


Practical example of a sports trading bet:

Sports bets trading can only be done on a Betting Exchange website, like Betfair. Why? Because only there you’re allowed to bet against a result (placing a Lay bet).


 

- What is a Lay bet?


In a football game between Valencia and Athletic Madrid, on Betfair’s Match Odds market you’ll find the next possible bets:


Valencia → Back bet @odd 1.96 Lay bet @odd 1.99
Atl Madrid → Back bet @odd 4.2 | Lay bet @odd 4.5
The Draw → Back bet @odd 3.75 | Lay bet @odd 3.8

 

A Lay bet is exactly the opposite of a Back bet. It means betting on a result not to happen.


betfair1-en

 

In this example, if you place a 10€ Lay bet on Valencia, you´re saying that Valencia won’t win the game, so if the game ends in a draw or Athletic Madrid wins, you will win your bet with a profit of 10€.


However if Valencia wins, you lose your bet, and 9.90€.


But if you betted 10€, how are you only going to lose 9.90€?


Instead of having the profit and possible loss as in normal betting, Lay betting you have something called liability.


 

- What is the liability?


Liability is the loss you have when you lose a Lay bet.


 

- How is the liability calculated?


It is calculated the same way the profit of a simple bet is calculated, in other words:


Liability = (odd – 1) X placed value

Notice that the calculation is equal to the profit calculation for a Back bet, actually by placing a Lay bet you’re buying an equivalent opposite bet from someone that placed a Back bet (Keep reading and you’ll understand this situation better).


 

Now that you know how Betfair betting works, let’s go see the trading concept.


 

- Trading, what is it all about?


Trading, as its name implies, means negotiating. So sports trading is the “art” of negotiating sports bets


By giving the users the possibility of betting in favor or against a result (Back and Lay bets) Betfair is known as a Betting Exchange website, resembling the financial stock market as we know.


 

With trading we are able to win money regardless the outcome of the game.


How?


It's just the same as if you buy an house for 100.000€ and then sell it for 150.000€, you have a profit of 50.000€, in sports trading you can do that as well, you can buy and sell bets assuring profit. Lets see how.


 

If you place a Back bet for Valencia, lets say 100€ with 1.99 odds, if Valencia wins your profit will be 99€ or if Valencia loses, your loss will be 100€.


 

But since you’re not willing of risking to lose 100€, you place a Lay bet for Valencia at 1.96 odds, also with a 100€ value.


 

- How to calculate the profit of the trade?


Simply subtracting the liability to the eventual profit, and we get the leftover, i.e.:


Trade profit = Back bet profit – liability

In this exemple the trade profit is: = 99€ – 96€ = 3€


betfair2-en

 

- But if the game ends in a draw, or if Athletic Madrid wins, I won’t win anything?


Not in the previous example, but if you make some adjustments, you can share the profit to the other results.


If you adjust a little your second bet, the Lay bet for Valencia, you’ll end up in a situation where you will win money, whatever the outcome of the game is.


betfair3-en

 

- But this way I have a small profit…


That’s true if you only do it once a game, but the beauty of it is you can do it countless times during the same game, so if you repeat the same process for 10 times you’ll win 11.5€, achieving a profit of 11.5%, and all of that without taking the risk to lose money.


 

- Can I buy and sell bets at any odds?


No, you can only buy or sell bets at the value the market is in each moment, so most of the times you have to wait for your bet to be matched.


 

- What is a matched and an unmatched bet?


Before answering that, you need to know that, at Betfair, the bets are made between users, you’re never betting against the bookmaker. You can only buy and sell bets to other users.


Betfair wins money by charging a commission from the user winnings.


 

So, to answer the question, consider the next image:


betfair4-en

 

The monetary value that appears under the value of the odds (marked in red) is money waiting to be matched.


 

- How do bets get matched?


If you place a Back bet for Valencia at 1.96, it will be matched immediately. Why? Because the field for Back betting is only match with Back bets.


The same goes for Lay betting, Lay bets are only matched immediately if placed on the field for Lay betting.


 

- How is that money waiting to be matched?


If in your opinion those odds are not fair, and you place the Back bet at higher odds, for example 1.99, as you can see in the image, your money has to wait to be matched.


The money will be queued in order of arrival, your money will only be matched after the all amount of money that was there before is matched. Meanwhile if more money goes into queue, it will only be matched after yours.


 

- Is it possible to match bets immediately at lower or higher values offered by the market?


No. The values are the current odds the market has to offer at this moment.


betfair5-en

 

In the image above (marked in red) are the current odds. If you want to make a Back bet for Valencia at lower odds, for example 1.94, it won’t be possible.


Betfair will match your bet at a fairer value, which in this case is 1.96. These are the fairest odds, because it allows you a bigger profit, or a lesser loss.


If you want to place a Back bet for Valencia, for example at 2.02, it will be waiting to be matched.


If you want to place a Lay bet, it will work the exact same way.


 

As you can see, trading is simpler than what it seems.