INTRODUCTION TO MATCHED BETTING
Matched betting involves betting on different outcomes of an event, with different bookmakers. Matched betting can greatly decrease variance with sportsbook bonuses, while usually only slightly decreasing EV. Skilled players who take the time to find quality arbs may be able to increase EV while playing through a bonus. However, there are some important issues to take note of.
Back and Lay Bets
Two types of bets that are key to matched betting are back bets and lay bets. A back bet is betting that a result will occur -- a traditional bet. One can back an overall win, a particular score, a half-time lead, the outcome of an election, or many other results.
A lay bet is taking the roll of the bookmaker and betting that a result will not occur -- basically the opposite of a back bet. Lay bets are available with several betting exchanges including Betfair, Betdaq, Mansion, Betmate, and Ibetx, among others. I recommend starting with Betfair.
For example, you might make a £100 back bet with 2/1 odds on the outcome of a Manchester United vs Newcastle match. If Manchester United won, the back bet would return £200 in winnings. You could also make a £100 lay bet with 2/1 odds on the outcome of the match. If Newcastle won, the lay bet would return £100 in winnings. If Manchester United won, the bet would have a £200 loss. When making the lay bet, you would need to have at least £200 in your account, to insure you have enough to support a loss.
Note that back and lay odds are rarely the same, like in the example above. The back odds are usually slightly below the lay odds. At the time I am writing this summary Betfair offers back and lay odds of 1.33 and 1.34 respectively, in a Man Utd vs Newcastle game. If the back odds were above the lay odds, then one could make a profit by betting on both outcomes.
Returning to the 2/1 (3.00 decimal) odds example above, consider a £100 free bet. Free bets may either return the initial stake or not return the initial stake. I'll assume the stake is returned. If the £100 bet wins, you receive £300. There is a approximately 1/3 chance of winning, so ~1/3 the time you win £300 and ~2/3 you do not receive winnings, making the EV ~£100.
If you make a lay bet of £100 at 2/1 (3.00 decimal) odds, then the lay bet returns £100 in winnings if the free bet loses and has a £200 loss if the free bet wins. This makes the net payout on a free bet loss £100 (from lay bet win) - £0 (from free bet loss) = £100, and the net payout on a free bet win £300 (from free bet win ) - £200 (from lay bet loss) = £100. The EV is the same with the single free bet, but with matched betting there is a profit when the free bet loses, as well as when it wins.
When making real bets, odds will rarely be so even or the same, and there will be commissions. This can make hand calculations complicated. Instead, you can use the matched betting calculator. The calculator returns the lay stake for equal profit on win/loss, as well as other figures including average profit. If we use the real odds listed above and Betfair's 5% commission on lay bets, then the calc returns a lay stake of £103.10 and average profit of £97.95. In this case, the lay commission and difference in odds decreases EV by 2%. Most players would consider this small reduction in EV worth the greatly decreased variance. However, there are other bonuses where the decision is not as obvious.
Matched betting can also be quite useful with cashable bonuses or qualifying bets. Again you can reduce variance on these bets, so the average loss is similar on both outcomes. There will usually be an average loss on such bets due to commissions. However, there are rare bets with higher back odds than lay odds, resulting in an average gain. Select the Qual button in the calc to compute lay stakes for qualifier bets, arb bets, wagering for a cashable bonus, or other bets without a bonus.
Stakes Not Returned & Non-cashable Bonuses
In the examples of the preceding section, the stakes were returned. It is more common for bookmakers to give free bets in which the stakes are not returned. So a £100 free bet at 2/1 odds would return £200, not £300. This change makes free bets less desirable and decreases EV. For stakes not returned bets, select the "SNR" bubble in the calc. The calc shows an average profit of £67 for the hypothetical example with 2/1 odds and no commission. The calc shows an average profit of £25 in the real example with 1.33 & 1.34 odds. The large difference in average profit relates to the odds of the selected bet. The EV of SNR bets increases as you select higher odds since the initial stake (that is not returned) is a smaller fraction of the overall payout.
Without a lay bet or commission, the EV of a free bet with stakes not returned is free bet size * (odds - 1) / odds, when odds is expressed in decimal. So with 10.00 odds, the EV of a £100 bet would be £90. And with 1.25 odds, the EV would be £20. When commission is included, EV decreases slightly. Using high lay odds to increase EV also dramatically increases the lay liability -- the amount you must have in your account to make a lay bet. A high lay liability can result in a very large loss, if a bet is cancelled or misplaced (see risks section below).
There are many ways to reduce variance using matched betting that don't involve making a lay bet at betting exchange. For example, you could bet on one team to win with bookmaker A and the other team to win with bookmaker B, simultaneously completing a wagering requirement at both sportsbooks. Note that such bets may have a result for which both bets lose, such as a draw game.
You can also use matched betting on other types of bets besides simple straight bets. With spread betting sportsbooks, you might place a buy bet at one sportsbook and a comparable sell bet at another.
Matched betting is not risk free. A variety of unexpected problems may occur including bookmakers canceling bets, bets being lost due to bookmaker rule differences, and placing the incorrect bet. You should not bet (or have a lay liability) that is more than you can afford to lose. A brief summary of possible issues is below:
--Bookmakers may have different rules for unique situations like a draw, overtime, or an incomplete game. Examples include different "rule 4" deductions in horse racing when a horse withdraws, resulting in modified odds; different overtime rules for ice hokey; different rules for incomplete games in tennis; different rules for pitchers changing in baseball; and different rules for ties in basketball & UFC matches. One bookmaker may cancel the bet and other may continue the bet. This can result in having to pay a large lay liability without any winnings. To minimize risk of problems, I recommend starting with simple win/loss bets on a sport you know well.
--It is surprisingly easy to accidentally place back and lay bets on different results. The same event may occur on several days; there may be many similar bets for the same event, such as one bet to win and another to place; and different event names may look quite similar.
--If you take too long to place a bet, you may miss the opportunity to make the bet or have significantly different odds.
--Bookmakers may cancel bets for reasons that are unrelated to the event outcome, such as accidentally having incorrect odds.
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