6th July 2015
When we look at laying horses we have the option to place our bets to a fixed stake or a fixed liability. What is the difference between these two types of staking and is there a benefit to using one or the other.
These are questions that I’m going to answer in todays article, but first of all I want to make sure that the process of laying is clear as it can be somewhat confusing.
Laying was brought into existence for the normal punter with the advent of betting exchanges. A layer is somebody who offers odds an event. Traditionally this would be only available through bookmakers who offer you odds on an event and take the risk of having to pay you out should the event end in your favour.
Betfair changed the face of betting by creating a market that allowed the normal punter to offer odds on an event, thereby effectively betting on an event to finish unfavourably for the person who is placing the bet with them.
In horse racing, when you lay a horse then you are betting that the horse won’t win the race (or place if you are doing it in the place market). However the odds you are offering (when you take them on Betfair) are what you are prepared to risk that the selection won’t win.
For example if you take odds of 5.00 (4/1) to lay on a horse for £1 then if this horse goes on to win, you will have to pay out £4. The punter who matched your 5.00 odds bet £1 at odds of 5.00 so if the horse wins they will be expecting you to pay them out £4 plus their £1 stake back. If the horse loses then you take their £1 stake as your profit.
This is how laying works. You take over the part of the bookmaker and so you have to pay out when the horse wins.
So what is fixed liability and fixed staking?
Let’s begin with fixed staking because it is the simplest of the two forms.
Fixed staking means that when you bet you place the amount you want to take should the horse lose.
For example, if you laid £50 on a runner then if the horse lost you would get a £50 return (minus Betfair’s commission). However you are going to be liable for a lot more than £50 if the horse should win. If the horse wins at odds of 5.00 then you are going to be liable to pay out £50 x 4 or £200 as this is what the punter who has taken your offer of 5.00 odds would expect to be paid if the horse wins.
This means that using fixed staking for laying means you need to bet a much smaller fraction of your bankroll than you may be used to.
It is common to bet no more than 0.5% of your bankroll on each selection when using this type of staking. If you’re laying at higher odds then you may want to reduce this to 0.1% of your bankroll.
Don’t be fooled by the small figures.
If you want to make a profit from betting then money management is absolutely crucial. There’s no point in betting bigger stakes and risking your entire bankroll.
Using fixed liability staking is the alternative method of lay betting.
This is actually a preference for a lot of people because if you bet £10 then this is the maximum you can lose on the selection.
Using our example of odds of 5.00 then if you were to bet £10 at fixed liability and the horse lost your profit would be £2.50. You want to have a fixed liability of £10, which means the maximum you want to lose on the bet is £10. If the horse won the race at odds of 5.00 then you would be paying at 4 (5.00 is the same as 4/1) times the stake of £2.50 which is £10, the maximum liability you wanted to risk.
This method allows you to set you maximum risk which makes it a much better way for new layers to bet. You can set your maximum liability to 1% or 2% of your bankroll and place your bets.
In fact, laying to maximum liability has shown to not only reduce the overall risk but it does not reduce the bankroll growth by any serious amount. The only major problem is that you have to be able to bet to a minimum stake of £2 on Betfair. This means that if you have a maximum liability of £10 and you lay at odds of 11.00 (10/1) then your actual stake would only be £1. A £1 would require you to pay out £10 should the horse win the race. In other words you would not be able to place this bet unless your maximum liability was £20.
You can work out the bankroll you would need by determining the maximum odds you are prepared to lay at and the percentage of your bankroll you would be prepared to risk. If you are going to lay up to odds of 5.00 (4/1) and you only want to risk 1% of your bankroll, then…
• The minimum stake on Betfair is £2.
• £2 at odds of 5.00 is a risk of £8 maximum per bet.
• If £8 is 1% of your bankroll then your bankroll needs to be £800.
Use this method to calculate the minimum bankroll that you need in order to be able to lay bet to fixed liability.
Back next Monday.