Value when laying odds
In the article Why we offer more value than an Exchange we highlighted how to calculate commission-free odds and explained how the odds offered on Exchanges might in some cases appear better than Pinnacle. However, once their commission is taken off to reveal the true value of the bet, Pinnacle remain the smart bettor’s choice.
But what about when you lay odds? Exchanges enable you to act as a bookmaker and lay the bets, in which case you are betting against the outcome happening. Sometimes a lay bet with an Exchange is equal to another bet at Pinnacle.
Exchanges are a useful weapon in a bettor’s armoury but the way that commission is deducted after the bet often leads them to misinterpret the extent of their value.
For example, if you lay an Away team at an Exchange expecting a draw or home win, you then do the same by betting on the Home team +0.5 at Pinnacle. In both cases, you win if the Home team wins or the match ends as a draw, while you lose if the Away team wins. Similar logic applies for betting on the Away team +0.5 at Pinnacle, which is equal to laying the Home team on a betting Exchange.
Other bookmakers offer this bet as “double chance” – home win or draw, away win or draw and home win or away win. For top tier matches, double chance is available on Exchanges too, but liquidity is much lower than on the 1X2 market, so you will struggle to get your bet matched at the desired odds.
Lets use an example. You believe Chelsea won’t lose away to Liverpool. Pinnacle offers Chelsea +0.5 at 1.971. Alternatively, you can click the pink boxes at the Exchange and lay Liverpool at odds of 2.02, or bet on Chelsea or the draw with other bookies at odds between 1.80 and 1.95.
Obviously, Pinnacle’ Chelsea +0.5 easily beats the double chance of other bookmakers, but does it offer better value than laying at the betting Exchange?
As we noticed earlier, when laying, you’re actually acting as the bookmaker, and Exchange member(s) who matched your lay bet is/are the punter(s), or backer(s).
In the example we used in the article How to calculate commission-free odds the backer bets £100, while the bookmaker offers £86, which appears to be the below equation, with the winner taking £186:
Stake * (Decimal odds – 1) or £100 * (1.86-1)
Therefore, when laying, you are risking the amount of money calculated using the formula above, which is known as “Liability”, and you can possibly win the backer’s stake, minus the commission, of course.
So, you lay Liverpool at odds of 2.02 and stake of £100. Your liability is:
100 * (2.02 – 1) = £102
Your possible winnings are the backer’s stake, or £100; if your commission is 5%, your net profit will be £95. So effectively you risked £102 to win £95 i.e. for a return of £197; hence, you got this bet at decimal odds of 197/102, or 1.931. Obviously, the profit you can achieve at Pinnacle beats the one at the Exchange by some 4%.
From this example above, it is easy to work out the formula to convert lay odds into effective back odds, i.e. odds that easily show your profit after commission. Again, if COMM represents your Exchange commission in %, and ODDS available signify your lay odds, then your actual odds, in decimal format, are calculated as:
Actual odds = 1 + (1 – COMM/100) / (ODDS – 1)
Exchanges are a useful weapon in a bettor’s armoury but the way that commission is deducted after the bet often leads them to misinterpret the extent of their value. Now you have the tools to make the calculations yourself it is up to you to decide where to bet.