The basics of Sports Trading

Trading on sport uses the same concepts as trading on the stock exchange or in real estate.  Buy low and sell high = making profit.  In sports trading, instead of the terms “buy” and “sell” we refer to the terms “back” and “lay”.

To “back” a team means that you are betting on them to win.  It’s the most traditional bet format used at most sports betting agencies around the world.  If you “lay” a team, then it’s the opposite as you are betting on them to lose.  Betfair is the most popular sports betting exchange that allows punters to both back and lay.

So in order to make money, without taking a risk on the actual result, all you need to do is back high and lay low.  It doesn’t matter whether you back or lay first, and it doesn’t matter whether the market is rising or falling.  Much like the stock markets, as long as the price is moving, there’s opportunity to make money.

Let’s take a look at an example:

You back the horse "Puffing Billy" to win in Race 4 at Flemington.  You put a $100 back bet on ten minutes before the start of the race at odds of 6.00.  Your position is:

Puffing Billy wins – You win $500
Puffing Billy loses – You lose $100

Suddenly there’s a late surge of money for your horse and its odds shorten to 4.00.  You can now lay this horse and reduce, or even remove, your liability.  You decide to lay the horse for the full $100.  Your position is now:

Puffing Billy wins – You win $200 (+$500 from the back bet, -$300 from the lay bet)
Puffing Billy loses – You break even  (-$100 from the back bet, +$100 from the lay bet)

When you lay the $100 at 4.00, your liability is $300, and combined with the $500 you made from the back bet, your overall position is +$200 if the horse wins.  So you’re in a strong position and effectively “freerolling” Puffing Billy to win.  But what if it doesn’t win?  You don’t lose anything, but you don’t win anything either.  Wouldn’t it be nice to lock in a profit regardless of the result?

With this position, you can achieve what is referred to as a “green book” (or hedging) and that is when you guarantee a win regardless of which horse wins.  To do this, we could’ve laid for $150 instead of $100.  Here’s how that changes the numbers:

Puffing Billy wins – You win $50 (+$500 from the back bet, -$450 from the lay bet)
Puffing Billy loses – You win $50 (-$100 from the back bet, +$150 from the lay bet)

Now we win $50 regardless of the result!  That’s the ideal position to be in, and should be a goal of any trader to achieve a green book.  Remember that this can be achieved on any sport – horse racing, cricket, football, golf, tennis...it doesn’t matter.  It’s the same technique.  You can also do this both pre-game or in-play.

In order to work out how much to lay to lock in a profit you can use software or a calculator such as http://www.oddschecker.com/betting-tools/hedging-calculator.html.

There are many trading strategies that can be employed in order to achieve a green book and we’ll discuss these in more detail in future articles.

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