Following a question that was left on a recent article here I thought I would write on the subject of what a book is in sports betting. A book is what a bookmaker makes, hence the name. This is the method of creating a price on every selection in the race. With Betfair allowing us to take the place of the bookmaker it allows us to create a book, but can we actually do that and what happens if we only want to lay a few selections?
First of all I want to clear up something. The only way to make a book is to lay every outcome in the event. In horse racing this means that we lay every selection in the race. Unfortunately it is not just as easy as laying every selection in a race. We need to take into account something called an over-round. The over-round for bookmakers is usually 10% and higher.
To understand the over-round we need to go back to look at odds. Odds are an estimate of the probability of a horse winning the race. For example a horse with odds of 4/1 is expected to have a 20% chance of winning the race. There is a 100% chance that one of the runners in the race will win the race, of course one of them has to. However, if you convert the odds a bookmaker is offering into probabilities then you will find that they add up to 110 or higher. This means that they are saying that there is a 110% chance that one of these horses will win the race. Of course, we know that 100% is the maximum chance that one of the horses will win the race, so what does this extra 10% mean?
This is the over-round and what this means is that the bookmaker is taking that 10% as their profit for managing the book. From all the bets they take they have to pay out 100% of them to the punters who bet on the winning horse. If they hadn’t taken any extra bets then they would make no profit. What they do is to make the book up to 110% or higher and then they pay out 100% to the winning punters and take the other 10% for themselves.
When you back on Betfair you will find the over-round at the top of odds…
As you can see the over-round is 101.7% which is a lot lower than a bookmaker would be offering. Because Betfair take a commission on the winner, there is no over-round needed for them to make a profit and this is why the odds on Betfair are usually better for backers.
However if you look at the over-round on the lay side of the market…
As you can see above the over-round on the lay side of the market is 98.3%. This works in reverse to the back side of the market, you are now taking the role of the bookmaker. If you are laying and you lay every horse to make a book then you will need to pay out 100% to the winners and take anything left over for yourself. With the over-round being 98.3% you can see that you are going to be short of 1.7% when you pay out the 100% to winners, let alone anything to make a profit on.
So making a book on Betfair is not as easy as laying every selection in a race. You need to manage your position in the same way a bookmaker would by looking to see which horses you think are too short and too long and how the market may move, you then lay all the horses at odds you think they should be. If they don’t get matched then you need to re-adjust the market until you are making a profit by laying the runners at different prices.
Is this simple?
Absolutely not, this requires a lot of skill and knowledge of the markets. In fact you are taking on the role of a bookmaker if you start to do this and you are going to need to know how the markets move and how to adjust your odds to manage the risk on your book.
If you are not laying all runners in a race then you are not actually creating a book. You are simply lay betting multiple runners. Another way to look at laying is that if you lay a single horse, this is the same as dutching all the other runners. If you lay 3 horses then this is the same as dutching the remaining runners. The approach is different but the effect is the same.
I hope that this article has cleared up the difference between laying a book and laying multiple runners.