What is trading?
Trading is essentially betting on the movement of a selection's price. If
you think that a selection's price will fall, you would back it now and
lay it later at the lower price. As long as the price moves in the direction
that you have anticipated, you will be able to lock in an immediate profit.
This trading process can be repeated several times within one event.
You can either wait until the price moves before closing out for a profit,
or you can submit an order at an exit price of your choice and wait until
it is matched. You can adjust both the price and the stake of your submitted
order at any time.
If you are trading on the same exchange, as is usually the case, you do
not have to provide funds to cover your closing bet. This is because the
exchange automatically treats the potential winnings from your first bet
as the stake for your closing bet.
Betting exchange traders also benefit from a reduced commission liability,
as commission is payable on your net market profit, as opposed to the (larger)
profit from the winning selection.
Specifying your trading sequence
If you are trading on a price rise, you should select the Lay Selection
1 stake constraint, as you will be laying first and backing later.
If you are trading on a price fall, you should select the Back Selection
1 stake constraint, as you will be backing first and then laying
off later.
Commission settings for trading
If you are placing both bets on the same exchange, which is the most common
and lucrative form of trading, ensure that the Back and lay on same exchange
commission option is selected. This lets Arb Cruncher know that commission
is only to be deducted from your net market profits, and that you do not
need to provide money up front for the closing bet of the trade.
This is the default setting of the Back/Lay calculator, so all you
have to do is open Back/Lay and enter your betting exchange
commission rate in the bottom commission box.
Trading example
You have already backed a horse called Hotshot on Betfair at 4.00
for £200.00 in anticipation of a price fall. The
Lay price of the horse subsequently shortens on the exchange to 2.50,
and you want to know how much you should lay it for at that price. The example
assumes that your Betfair commission rate is 4%.
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1. |
Open the Multilay
calculator. |
2. |
Enter the bet details (both prices, the original
stake of the Back bet, and the 5% Betfair commission)
in the white boxes, and click the Calculate
button. |
3. |
Arb Cruncher instructs you to lay the horse for
£320.00 at the new Lay price of 2.50.
This stakes locks in a trading profit of £114.00.
See the breakdown of this profit figure below. |
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Back Hotshot
£200.00@4.00 |
Lay Hotshot
£320.00@2.50 |
Trading Profit |
So, let's have a closer look at this profit figure of £114.00.
If Hotshot were to win, you would win £600 (200 x 3.00)
from the Back bet, but lose £480.00 (320 x 1.50) from the
Lay bet, as you have to pay out as a layer. This gives you a net market
profit of £120, from which Betfair will deduct commission
of 5%. That leaves you with £114 (120.00
- (0.05 x 120.00)).
If Hotshot were to lose, the calculation is even easier. You lose £200
from your Back bet, but win £320 from the Lay bet. Again,
this gives a net market profit of £120 from which Betfair
deducts the same 5% commission to give £114
as your trading profit.
Trading example screenshot
This is a screenshot of the above example. Note that the Lay Bet
Liability is zero because Betfair realises that your winnings from
your Back bet would cover the losses from the Lay bet, so do not require
any additional deposit from you. So, as your Total Stake
is £200, the Yield (return) on your trade
is 57% ((114 / 200) x 100).
What is the Lay Bet Liability?
The Lay Bet Liability is the amount that you would lose
if the selection that you are laying wins. It therefore corresponds to your
stake (exposure) as a layer, and should not be confused with the backer's
stake that you are laying. Betting exchanges require you to deposit enough
funds to cover the liability of any lay bet that you make. It is obtained
by the following formula:
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| |
Lay Bet Liability = Backer's
Stake x (Price - 1)
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For example, if you layed a
horse for £100 at 6.00, your Lay Bet Liability would be
£500. This is the amount that you would have to pay the backer if the horse
wins. If the horse does not win, you would win the backer's stake £100 minus
commission.
Arb Cruncher displays your Lay Bet Liability for all Back/Lay
arbs and trades. The Total Stake displayed by Arb Cruncher
is computed by adding the Back Bet Stake to the Lay
Bet Liability.
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