Tutorial : Betting exchange


What is Betfair:

Betfair is the world's largest Internet betting exchange where people offer to bet on specific markets. A bet exchange enables punters (gamblers) to bet at odds set and requested by other punters rather than by a bookmaker.
Bets are proposed with an odd and a stake. A bet is unmatched until someone is interested in betting against you. Once the bet is 'matched' you can no longer cancel it.
It is not Betfair that will give you the money if you win, and will not get your money if you lose. So where does the money come from ? Actually, it comes from other people who 'lay' or 'back' on your bet. All this is done in anonymously. Fees are taken from the profits of the punters.


Odds:

The Odds function estimating the potential profit of a bet. It is the opposite of one minus probability of an event. The lower is the odd is, the higher is the probability for an event to occur. Odd = 1 / (1-probability).


Odds in Betfair:

Odds in Betfair are of European type. It is an integer or decimal number (ex : 1.2 or 2). To calculate your profit according to odds, use this formula:
Profit = Stake * (Odd - 1).
For an odd equal to 1.3 and stakes to 100€, potential profit is 0.3*100€ = 30€


Single bet:

Betting on the event: If selection win, the base stake is restored with a profit equal to:
Profit = stake * (odd - 1). 

Back an event means betting on an event that is highly possible to occur. In case of success, the player will recover his stake multiplied by odds.
Betfair offers the opportunity for punters to act as a bookmaker, i.e. to offer bets at certain odds to other punters.
This is called 'lay'  i.e. in order to win for you, selection has to lose.


Example to practice:

Let us imagine a match opposing France to Brazil.

Brazil’s odds in Back are 6, and France’s are 2. You are supporting France:

Back France for 100€:

-In case France wins, you win (2-1)*100€ = 100€ profit.
-In case France loses, you lose your 100€.


Lay Brazil with stake of 100€:

-In case France wins, you earn 100€ from punters who took your bet, i.e. punters who expected Brazil to win.
-In case Brazil loses, you have to pay (6*100€) – 100€ = 500€.

You can also combine the 2 techniques to limit and possibly avoid losing.

- back at X odd then lay at Y odd if Y < X.
- lay at Y odd then back at X odd if X > Y.


Example:

Let us imagine a match France (odds 2) / Italy (odds 1.3) You back France at odds 2.
In case France wins: 500€*(2-1) = 500€ of profit.
You lay France with 600€ because its odd has fallen to 1.2

France win so you earn the back and lose the lay
-You win the back 500*(1.6-1) = 300 € profit, but you have to pay back the punter who has taken your lay: 600*(1.2-1) = 120 €.
Your final profit is 300 - 120 = 180 €. 

France loses so you win on lay and lose on back.
-Your back bet makes you lose 500€, your lay makes you win 600€.
Your final profit is 600€-500€ = 100€.

In both cases, you have generated a profit no matter who the winner is.