Pinnacle Arbitrage – Alternative to Laying on Betting Exchanges

Calculating an exchange hidden commission
Unlike regular bookmakers, exchanges charge a commission on your winnings, i.e. net profit on the market. Base commission is often at 5% of your winnings but increased to 6% or 7% for many countries. With an exchange like Betfair, you place bets, you collect points that will discount your commission, but the points are subject to decay every week, and if you are really successful, you will find yourself caught in the so-called Premium Charge, which may take as much as 60% of your profit.

Back Bet

Example

Pinnacle offers 1X2 odds of 1.84 for Swansea to win against Crystal Palace, while that same bet is available at 1.86 at a betting exchange. And you wonder which one offers better value – is the exchange’s 1.86 after commission still better than Pinnacle’s commission-free 1.84?

Decimal Odds

Decimal odds represent an inversion of the probability of an event to happen (e.g., the probability of landing on a head when tossing a fair coin is 50%, or 0.50, so equivalent odds are 1/0.50 = 2.00), but also a ratio of your possible return and your stake. For example, if you staked £100 at odds of 1.86, you hope to pocket £186, which consists of the £100 you staked earlier and £86 that you won.

Decimal odds = return/stake
or
Decimal odds = 1 + (profit/stake)

As we have explained, betting exchanges charge a commission on net profit on the market. That means, in this example above, you will get your £100 back untouched, but the £86 that you won will have commission taken off first.

Betting Exchange Commission

Unlike regular bookmakers, exchanges charge a commission on your winnings, i.e. net profit on the market

Let’s suppose that you live in a country that has not been affected by commission increase, but is unlucky enough to collect sufficient points for a commission discount; that means betting exchanges like Betfair will charge 5% of your winnings, or 0.05 * £86 = £4.3; you will pocket the remaining 0.95 * £86 = £81.70.

To summarize, you risked £100 to win £81.70; therefore, you effectively got your bet at 1.817 – or some 3% worse than the odds available at Pinnacle.

Actual Odds

By now, you understand how to calculate net odds after commission; if COMM is your exchange commission in %, and ODDS available back odds, then your actual odds, in decimal format, are calculated as:

Actual odds = 1 + (1 – COMM/100) * (ODDS – 1)

Exchanges are a useful weapon in a bettor’s armoury but the way that commission is deducted after the bet often leads them to misinterpret the extent of their value. Now you have the tools to make the calculations yourself it is up to you to decide where to bet, but we think smart bettors will choose Pinnacle.Pinnacle.com

Think that you have to use an Exchange to lay a bet? Pinnacle Sports can provide an alternative. Find out how. Value when laying odds

In the above article, we highlighted how to calculate commission-free odds and explained how the odds offered on Exchanges initially appear better than Pinnacle Sports. However, once their commission is taken off to reveal the true value of the bet, Pinnacle Sports remain the smart bettor’s choice.

Lay Bet

But what about when you lay odds? Exchanges enable you to act as a bookmaker and lay the bets, in which case you are betting against the outcome happening. Sometimes a lay bet with an Exchange is equal to another bet at Pinnacle Sports.

If you lay an Away team at an Exchange expecting a draw or home win, you then do the same by betting on the Home team +0.5 at Pinnacle Sports. In both cases, you win if the Home team wins or the match ends as a draw, while you lose if the Away team wins. Similar logic applies for betting on the Away team +0.5 at Pinnacle Sports, which is equal to laying the Home team on a betting Exchange.

Double Chance

Other bookmakers offer this bet as a “double chance” – home win or draw, away win or draw and home win or away win. For top-tier matches, the double chance is available on Exchanges too, but liquidity is much lower than on the 1X2 market, so you will struggle to get your bet matched at the desired odds.

Example

You believe Chelsea won’t lose away to Liverpool. Pinnacle Sports offers Chelsea +0.5 at 1.971.(GEM Note: +0.5 is AH – Asian Handicap, which is exactly the same as double chance, so you will win if Chelsea wins or draw)  Alternatively, you can click the pink boxes at the Exchange and lay Liverpool at odds of 2.02, or bet on Chelsea or the draw with other bookies at odds between 1.80 and 1.95.

Obviously, Pinnacle Sports’ Chelsea +0.5 easily beats the double chance of other bookmakers, but does it offer better value than laying at the Betting Exchange?

As we noticed earlier when laying, you’re actually acting as the bookmaker, and the Exchange member(s) who matched your lay bet is/are the punter(s), or backer(s).

In the previous article example, the backer bets £100, while the bookmaker offers £86, which appears to be the below equation, with the winner taking £186:

Stake * (Decimal odds – 1) or £100 * (1.86-1)

Liability

Therefore, when laying, you are risking the amount of money calculated using the formula above, which is known as “Liability”, and you can possibly win the backer’s stake, minus the commission, of course.

So, you lay Liverpool at odds of 2.02 and a stake of £100. Your liability is:

100 * (2.02 – 1) = £102

Your possible winnings are the backer’s stake, or £100; if your commission is 5%, your net profit will be £95. So effectively you risked £102 to win £95 i.e. for a return of £197; hence, you got this bet at

decimal odds of 197/102, or 1.931. Obviously, the profit you can achieve at Pinnacle beats the oneat the Exchange by some 4%.

From this example above, it is easy to work out the formula to convert lay odds into effective back odds, i.e. odds that easily show your profit after commission. Again, if COMM represents your Exchange commission in %, and ODDS available signify your lay odds, then your actual odds, in decimal format, are calculated as:

Actual odds = 1 + (1 – COMM/100) / (ODDS – 1)

Exchanges are a useful weapon in a bettor’s armoury but the way that commission is deducted after the bet often leads them to misinterpret the extent of their value. Now you have the tools to make the calculations yourself it is up to you to decide where to bet.
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