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What is a Lay bet? (example)

What is a Lay bet? (example)

The possibility to bet against something, or simply the Lay bets, is the key to allow us to trade sports bets. Without Lay bets, there will not be trading.

This type of bets are only available in bet exchanges such as Betfair (the largest one). Lay bets are not available in traditional bookmakers.

by Hugo Gomes   |   comments 0
Tuesday, March 24 2015

- 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:
Valência → Back bet @odd 1.96 | Lay bet @odd 1.99
Atlético 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.
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.

In a Lay bet, the liability is not easily seen because the value we input when placing the Lay bet is not what we are risking. It is actually what we want to win.
Liability has to be calculated according the odds we are betting, as what we will lose is directly what people who did a back bet on the same odd will win. Our lay bet will pay the winnings of the back bets on that odd.

- 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 Lay bets works, you can read the full trading example here.

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