3. Back / Backing

In the betting exchange world the two most widely used terms are Back & Lay. The betting exchange model combines two very different disciplines, namely betting & financial / stock exchange. The combination of these two disciplines gave rise to the new concepts of Back & Lay.

In this article we look at the term Back, and explain what Back means both in terms of betting, and in terms of the exchange.

The word Back is the general name for an action taken on a betting exchange, and is derived from the following concepts:

  1. Bet on something to win. (from betting)
  2. Selling a commodity. (from the financial exchange) 

Bet on something to win

Betting on something should be familiar to most, especially those who have placed a bet at least once in their life. You choose what you think will happen and you bet a certain amount of money on that choice with a bookmaker.  For example, let’s say there is a football match between Manchester United and Chelsea. There are three possible outcomes to the match {which are called selections on a betting exchange}, along with their respective prices:

  1. Manchester wins @2.36
  2. Chelsea wins @2.80
  3. The draw @3.45

Each of these possible outcomes of the game has odds and as a bettor it is your interest to bet on your selection at the highest price available. For instance, if a betting exchange is offering odds of 2.80 and a traditional bookmaker is offering odds of 2.50, in simple terms you would be £30 poorer if your bet was successful placing your bet with the traditional bookmaker.

To earn as much money as possible you want to get the best price for your bet {AKA Back high}. So when you bet £100 on Chelsea at odds of 2.80, your position in the market would look as follows:

  1. Manchester wins - £100
  2. Chelsea + £180
  3. Draw - £100

In other words, if Chelsea wins, your net income will be £180, but if Manchester wins or the match is a draw, you will lose your £100 stake.

Selling a commodity

The basic rule of business is to sell something for more than you paid for it. As such when trading the idea is to buy low and sell high, which if successful will make you a profit. As we said in the previous paragraph, you should back high to earn as much as possible, so from the perspective of trading and financial exchanges, it means that the Back is the term for selling a commodity.

How exactly you can back at the highest price on the betting exchange is the subject of another tutorial. The next chapter will explain the new concept of Laying which is the exact opposite of Backing.

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