Underlaying - what is it and why do it?

[munk]

Introduction
Underlaying is the term used to refer to a matched bet where you do not lay your initial back bet off completely. Most commonly 'underlaying' is used to refer to a lay bet placed on a betting exchange like Betfair, although it can be used to refer to a 2 way (or more) 'dutch' where you back 'the other side' of your initial bet at other bookmaker(s).


Here is a very simple example of an underlayed matched bet:

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £25 at odds of 6.6 at Betfair (5% commission)

This is an 'underlay' because the 'optimal' amount to lay at Betfair is actually £26.72, so by only laying £25 you are laying less at Betfair than you would normally. If we compare the possible outcomes of the underlayed matched bet compared to the 'optimal' matched bet:

Optimal Matched Bet

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £26.72 at odds of 6.6 at Betfair (5% commission)

possible outcomes:

• Result is 1-0 Man Utd: +150 (back bet profit) - 149.63 (lay bet loss) = £0.37 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 25.38 (lay bet profit) = £0.38 profit

So either way you have a profit of ~38p no matter what the result is.

Underlayed Matched Bet

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £25 at odds of 6.6 at Betfair (5% commission)

possible outcomes:

• Result is 1-0 Man Utd: +150 (back bet profit) - 140 (lay bet loss) = £10 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 23.75 (lay bet profit) = £1.25 loss

So by underlaying you will make a profit of £10 if the bet wins (the result is 1-0) or you make a loss of £1.25 if the bet loses.

[munk]

Why Underlay?
There are many reasons why you might want to underlay a bet, here are a few reasons that we will look at in this article:

• to add some 'interest' to a bet
• to make a larger profit if an arb wins at the bookmaker
• to leave yourself the option of laying more of the bet off in play when the odds become more favourable
• to attempt to 'bust out' of a bonus on the first bet

By no means is this list exhaustive, there are many other reasons why you might want to underlay a bet, but these are a few practical scenarios where you might want to underlay a bet to make more profit if the bet wins.

In the posts that follow we will look at each of these underlaying scenarios and discuss the benefits and pitfalls.

[munk]

Underlaying to add some 'interest' to a bet
If you are betting on something that you will be watching, you might want to add a bit of spice to things by not completely laying off your bet so you win more if the bet wins. This is an ideal thing to do for example if you're completing the wagering requirement for a bonus at a bookmaker anyway.

In this way you are effectively killing two birds with one stone, you're completing part of the wagering requirement but also making the event you're going to watch a bit more interesting by leaving part of the bet unlaid so you win more if the bet does win.

Example
Man Utd are playing against Chelsea and you think that Man Utd will win 1-0. You have some conviction here and so to spice things up you decide to place a £25 bet on at a bookmaker where you're completing a wagering requirement anyway, but not completely lay off the £25 bet.

So you underlay the bet as follows:

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £15 at odds of 6.6 at Betfair (5% commission)

So here the 'optimal' matched bet would net you 38p no matter what the result - you would optimally lay £26.72@6.6 at Betfair to make 38p no matter what the result is - however instead you've opted to just lay £15 so you make a much larger profit if the bet wins (although of course you will make a loss if it loses as well!).

The underlayed matched bet's outcomes are as follows:

• Result is 1-0 Man Utd: +150 (back bet profit) - 84 (lay bet loss) = £66 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 14.25 (lay bet profit) = £10.75 loss

So in this way you've underlayed so that you make a much larger £66 profit if the bet wins, or a £10.75 loss if it loses. To some degree the £10.75 is your new 'liability', you're accepting a possible loss of £10.75 as the price to pay for making the bet more interesting.

[munk]

Underlaying to make more profit if an arb wins at the bookmaker
When you win a bet at a bookmaker, there is more chance that that bookmaker will limit you in future when you go to place bets. This is a simple fact - bookmaker's run businesses, businesses exist to make a profit and by-and-large when you win at a bookmaker your profitability to that bookmaker is lessened.

As such, when you place a bet at a bookmaker on a profitable arb (ie a bet that you can lay off to make a profit no matter what the result) it makes some sense to underlay the bet so you make no profit if the bet loses and more profit if the bet wins. The rationale for this is that if you win at the bookie, they are more likely to limit you and as a result a valuable resource to you (ie the bookie account) will become less profitable in future (because you cannot place the same large bets there any more). Alternatively if your lay bet wins (ie at Betfair), Betfair will not limit you because as a betting exchange they actually only make a profit themselves when you win via comission!.

This rationale is very unscientific, but it does make sense on some other levels - for example if you win at a bookmaker, generally your money is 'less safe' at the bookmaker than it would be in say Betfair so it makes sense to compensate yourself more by making more profit if the bet wins at the bookmaker. Also if you're betting at longer odds, if you underlay you will make a much larger profit if the bet wins than if you'd made the same underlay at shorter odds (and in this case winning at longer odds is definitely something that will be more likely to flag your account up to a bookmaker as unprofitable!).

This approach is quite easy to do as well with arbs - after a while it's easy to remember exactly what the amount is you have to lay to break even if your bet loses, so as long as the arb is profitable you can quickly and easily lay the right amount without thinking about it too much. For example for a £50 back bet, to lay that off at any price on betfair to break even if the lay bet wins, you would need to bet £52.63 - if you place a lot of £50 profitable arb lay bets, you can just enter '52.63' and know that no matter what happens at worst you will break even.

Example
Using the same example as above, betting on Man Utd to win 1-0 on an arb of 7 at the bookie vs 6.6 to lay at Betfair - only this time we will underlay it so we make exactly zero profit if the bet loses at the bookie and make a larger than optimal profit if it wins.

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £26.32 at odds of 6.6 at Betfair (5% commission)

So again the 'optimal' matched bet would net you 38p no matter what the result. However in this case the underlayed bet's outcomes are as follows:

• Result is 1-0 Man Utd: +150 (back bet profit) - 147.39 (lay bet loss) = £2.61 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 25 (lay bet profit) = £0 profit/loss

You make no profit if the bet loses, but make a larger £2.61 profit if it wins (not a lot, but a lot more than 38p as you would for the 'optimal' lay amount).

[munk]

Underlaying to leave yourself the option of laying more of the bet off in-play
This is really an extension of the point above about underlaying to add some interest to a match. In this case, again suppose you have some conviction that the resulting scoreline will be 1-0 to Man Utd. What you could do is only lay off part of the bet before the match starts, and then later if the match goes your way you can lay more of the bet off whilst it is in-play.

This approach obviously relies on the fact that it's possible to lay the bet off in play first and foremost - Betfair does offer in-play betting on many events, but it's always very important to check that your event will be available to bet on in-play. You can check on this by reading the 'Rules' tab for the market in question in the right-hand panel in Betfair where it will tell you if the market will go 'in-play'.

This approach also relies on the fact you will be watching the match or at least be available to keep track of the odds on the match as it goes in play so you can place further lay bets as needed. Obviously don't do this if you won't be around to place further lay bets in play!

Here then we look at an example of leaving yourself the option to lay more of a bet off in play:

Example
Again we are betting on Man Utd to win 1-0 on an arb of 7 at the bookie vs 6.6 to lay at Betfair. Again we have some conviction that the final result will be 1-0 - we decide to only lay off a small amount before the match starts and then aim to lay the rest of the bet off at a much lower price in-play.

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £10 at odds of 6.6 at Betfair (5% commission)

Now, the match starts off fairly quietly with no goals, but Man Utd have certainly been putting in some effort to score. As a result, by half time the odds on the 1-0 scoreline have shortened down to just 5 (as opposed to 6.6 pre KO). This leaves you with a good opportunity to lay more of the bet off and guarantee a locked in profit no matter what the result as follows:

• Lay £15 at odds of 5 at Betfair (5% commission)

With this extra bet you now have the following possible outcomes:

• Result is 1-0 Man Utd: +150 (back bet profit) - 116 (lay bet loss) = £34 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 23.75 (lay bet profit) = £1.25 loss

HOWEVER you could take this even further - now suppose that Man Utd do eventually manage to score in the 70th minute of the game. This brings the price on 1-0 right down to just 2.5 and leaves you with another opportunity to lock in more profit:

• Lay £10 at odds of 2.5 at Betfair (5% commission)

Now the possible outcomes for all the back/lay bets you've placed are:

• Result is 1-0 Man Utd: +150 (back bet profit) - 131 (lay bet loss) = £19 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 33.25 (lay bet profit) = £8.25 profit

Very tidy result - you're now fully 'greened up' and no matter what happens the worst possible result is that you will make a profit of £8.25!

[munk]

Underlaying to attempt to 'bust out' of a bonus on the first bet
Often a bonus wagering requirement (WR) will be something like 'wager the deposit and bonus amounts 10 times before withdrawing' - for example 'Deposit £15, get a £10 bonus' with a WR of 10x(d+b)=10x£25=£250. For this example we are talking about an 'account credit' bonus, not a 'stake not returned' (SNR) bonus - although the same principle does apply to SNR free bet balances which you want to try and bust out on the first bet.

In this case, wagering the full £250 will obviously take longer than wagering just £25 (the initial deposit+bonus), so one approach is to place the full £25 balance on your very first bet, but heavily underlay it so that you make a small profit if the first bet loses or else make a much larger profit if it goes on to win.

The rationale here is that if the first bet loses, your balance at the bookmaker will be zero and the WR is 'complete', you do not have to do any further wagering and you have 'bust' the bonus out of the book. Alternatively if your very first bet DOES go on to win, you will make a much larger profit on that first bet which compensates you for having to continue with the remaining WR.

You can actually continue this approach with subsequent bets you place (as long as you can get the whole balance on a single bet) - effectively using the profit you made from the first bet as a 'buffer' or 'leverage' to help you try and bust out of the book again.

In the example below we will look at an example of underlaying to bust out of a bonus, including how to use the profit from a winning first bet as leverage when attempting to bust out with a second bet.

Example
Here you have accepted the bonus as detailed above (£15 deposit for £10 bonus, £250 WR) and you decide to try and bust out the bonus on the very first bet. Again we will use the same Man Utd example as above:

• Back £25 at odds of 7 at BookA for ManUtd to win 1-0
• Lay £20 at odds of 6.6 at Betfair (5% commission)

So we have the following possible outcomes:

• Result is 1-0 Man Utd: +150 (back bet profit) - 112 (lay bet loss) = £38 profit
• Result is NOT 1-0 Man Utd: -25 (back bet loss) + 19 (lay bet profit) = £6 loss

Now, in the case that the first bet loses, whilst the figure for the losing bet scenario is a £6 loss, in reality if we offset that against the original £10 bonus we actually have a PROFIT of £4 (-£6 matched bet loss + £10 bonus). So we've bust the bonus out for a £4 profit.

Alternatively if that first bet does go on to win, we've actually got an overall profit of £38 profit which compensates us for having to carry on placing further bets at this book. We can also use the £48 (the £38 profit from this bet plus the original £10 bonus) as 'leverage' to try and bust the bet out with even heavier underlays on subsequent bets. We can look at how that might work below:

Our balance is now be £150 at the book. We find another arb to place the full £150 balance on, Sunderland to win against Chelsea at odds of 8 vs 7.6 at Betfair (5% commission as always). We decide to try and bust the bonus out again by heavily underlaying as follows:

• Back £150 at odds of 8 at BookA for Sunderland to win
• Lay £140 at odds of 7.6 at Betfair (5% commission)

The profit/loss scenarios for this matched bet is:

• Result is Sunderland wins: +1050 (back bet profit) - 924 (lay bet loss) = £126 profit
• Result is Sunderland does NOT win: -150 (back bet loss) + 133 (lay bet profit) = £17 loss

Now, if we lose this bet the £17 loss initially looks quite large. However when we take into account the £38 profit we made on the first bet PLUS the £10 initial bonus, our overall profit/loss is:

• -17 (this matched bet's loss) + 38 (first matched bet profit) + 10 = £31

So not only have we bust out of the bonus, we've also made a profit of £31 - which is very nice considering initially the bonus was only £10!

Alternatively if this bet does actually win, we've made a much much larger profit now of £126 and have now completed £175 of the required £250 WR, only another £75 bet to place. You would probably just optimally lay off this final bet, because you're not betting the full balance to attempt to 'bust out', this final bet WILL bust you out anyway so you don't need to underlay any further (unless you want to for a different reason).

The larger £126 profit for this winning bet does also go some way to 'compensate' you for the risk involved of now having a much larger balance at this book. Since the bet won, your balance will now be £1200 and you will more than likely have to make a withdrawal. If this is a smaller book then there is a very very (very!) rare chance that that balance will be at risk if the book goes out of business or some other problem occurs - it must be emphasized though this risk is very small (probably less than half a percent) and if you've done your research well to start with on this book, the risk will be much closer to zero.

[munk]

Summary
In this article we've looked at what 'Underlaying' is and a few examples of how you can use underlaying to achive various goals. There are no hard and fast rules with regards to underlaying and especially in the case where you're trying to bust out a bonus, you must decide on a case by case basis how much to underlay your bets by.

[munk]

PS - any comments on this would be obliged or if there's any other reasons for underlaying that you think are more important than the ones I listed, I went for just a handful of reasons, there are probably a few others I think I left out because it would just go on forever (forget what they are now I wrote this a few weeks ago now).

It's quite long but it's actually meant to go on a CMS system with each 'post' above as an individual page, so doesn't look quite so overwhelming in that format. Other than that if there's any obvious maths errors or w/e let me know.

Cheers.

[nixonite]

Good post. Might be worth adding that both underlaying and overlaying may be necessary in order to take advantage of certain offers properly. E.g. Bonus if bet wins

[munk]

Good post. Might be worth adding that both underlaying and overlaying may be necessary in order to take advantage of certain offers properly. E.g. Bonus if bet wins

Cheers nixonite. Yes, I think that is a good idea... do need to write other articles for things like 'ifbets', there isn't any definitive article on this site for those kind of staking strategies. But you're right it definitely does just come down to a question of over/underlaying re ifbets so theoretically could fit in this article (though would probably put it in it's own because it's a bit advanced for this beginner type article).

Thanks for the idea.