03 Lay betting / Betfair Education / 23 January 2008 / Leave a comment

Imagine two everyday scenarios - flipping a coin and rolling a dice.

You and your mate each put a fiver on the coin toss. One calls Heads, the other gets Tails, and whoever wins gets £10.

You backed Heads for £5 to win another £5. The odds you received were evens or 2.

Or looking at it another way:

You laid Tails. You let your mate have £5 on Tails to win another £5, at odds of 2.

Either way, if it lands Heads, you win a fiver, if it lands Tails, you lose a fiver. 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. Pick a number. Your mate 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 mate agrees to pay you the true 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. If you've noticed the similarity, well done. It's simply '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 should all come 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.