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Tomas

3.1. Back

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In the betting exchange world, the two most widely used terms are Back & Lay. The betting exchange model combines two very different disciplines, namely betting & financial / stock exchange. The combination of these two disciplines gave rise to the new concepts of Back & Lay.

In this chapter, we look at the term Back and explain what Back means both in terms of betting, and in terms of the exchange.

The word Back is the general name for an action taken on a betting exchange, and is derived from the following concepts:

  • Bet on something to win (from betting)

  • Selling a commodity (from the financial exchange)

3.1.1. Bet To Win

Betting on something should be familiar to most people, especially those who have placed a bet at least once in their life. You choose what you think will happen and you bet a certain amount of money on that choice with a bookmaker. For example, let’s say there’s a normal horseracing event. In this case, there are five runners in the race {which are called selections on a betting exchange}, along with their respective prices:

  • Labyrinth wins @1.81

  • Organza wins @2.44

  • Occasional Dream @55

  • Mette @75

  • Chandon Elysees @80

And it looks like this on the Betfair website:

5a9594f733d74_betfairmarket.png.41a8715b7564b249e1c853f3695af5b7.png

Remember – Back is always blue

You may be confused with the numerous prices and amounts in the grid above. You don’t have to be. That’s just the nature of a betting exchange. Because there are people betting against each other, Betfair only displays what users offer to each other. And the best offers to Back are in the blue column. You can match your bet at this price right now.

Each of the possible outcomes of the race has odds, and as a bettor, it’s in your best interest to bet on your selection at the highest available price. For instance, if a betting exchange is offering odds of 1.81, and a traditional bookmaker is offering odds of 1.61, you would be £20 poorer if your £100 bet was successful by placing your bet with a traditional bookmaker.

To earn as much money as possible, you want to get the best price for your bet (AKA Back high). So when you bet £100 on Labyrinth, at odds of 1.81, your position in the market would look as follows:

5a9594f70581b_backbetbetfairwebsite.png.0c1afaf9c60a6451b2b514bfa97a99e2.png

Market situation after placing a £100 bet on the horse Labyrinth

In other words, if Labyrinth wins, your net income would be £81. But if any of the other horses win, you would lose your £100 stake.

3.1.2. Selling a Commodity

The basic rule of business is to sell something for more than you paid for it. As such, the idea is to buy low and sell high when trading. If successful, you’ll make a profit. As we said in the previous paragraph, you should Back high to earn as much as possible. From the perspective of trading and financial exchanges, it means that Back is the term for selling a commodity.

How exactly to Back at the highest price on the betting exchange is the subject of another chapter.

3.1.3. Better Price

You don’t have to only accept prices that are currently available on the betting exchange. When placing a bet, you can choose your own price like this:

5a9594f757608_betterprice.png.0c1eeab1e3ec1d5759b86cffcaf062e4.png

Choose a better price and wait to see if it will get matched

Prices on a betting exchange constantly fluctuate, and sometimes, they fluctuate a lot! There are more transactions on Betfair per day than on all European stock exchanges combined, which is a good reason for prices to fluctuate. As I said, your goal is to Back high. You can either accept the current available price, and get your bet matched instantly, or you can try to ask for a better price. Then wait if the market positively fluctuates in your direction. When it goes back, cash out for a profit.

What does this mean? When you think the price will not increase any further, you immediately take the best price available at that time (the one in the blue column). If you think the price will go up and then down, you ask for a better price. More info about this strategy will be outlined in the following chapters.

 

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