Help with terminology used in the betting world

Overround : If you convert all the bookmakers prices to percentages and add them up they will come to more than 100% this is the bookmakers edge on the market.  

Value : When you believe you have acquired a better price than the true odds of something happening.

Lay or Laying : This is what a bookmaker does when he takes your bet or when you are betting AGAINST something happening on a Betting Exchange.

Back or Backing : This is what you do when you place a bet with a bookmaker or when you are betting FOR something happening.

Trade or Trading : This is the concept of backing or laying a selection with the opinion that you will be able to obtain a better price in the future.  This can be done pre-event or in play, as long as it is done before the end of the event.

Hedging : This is equalising the profit or loss against all the selections in the market, so no matter what the outcome the same profit or loss will be achieved.

Matched or Unmatched : In order to place a bet on a Betting Exchange the bet must be matched with someone with an opposite opinion.  If you want to back something then someone has to lay your bet, if you want to lay something then a backer has to accept your odds.  When this happens the bet is known as MATCHED, if you can’t get the price you want the bet will sit in the exchange as UNMATCHED until the event starts or ends (depending on how you want the exchange to handle your unmatched bets).  

Rule 4’s or Reduction Factors : In horse racing markets this is a regular event, when a horse is removed from the race and your bet was struck prior to that information.  Your bet with the bookmakers could be subject to a Rule 4, which is basically returned as a value in the £ (see table below)…

Betting Exchange Reduction Factors

On a betting exchange they don’t use a rule 4 they use something called a Reduction Factor and this is basically a percentage reduction on the decimal price that you had before the withdrawn horse.

If you want to calculate the new price once a reduction factor has been applied, this is how:

(Decimal odds / 100) x reduction factor of non-runner =  amount to reduce original price by

Subtract this amount from the original price to calculate the new price.

 Example Layer:
– You matched a lay bet on the horse ‘Diamond Night’ for £10 @ 8.6.
– Your liability is £76.
– A horse in the same race is now withdrawn with a reduction factor of 16.2%
(8.6 / 100 ) x 16.2 = 1.39 (this gives the amount to be reduced from the original price)
8.6 – 1.39 = 7.21 (this is the new price to calculate your liability.)
Your liability is reduced to £62.10 (instead of £76 originally).