Let’s take an example:
Firstly, back a horse to win with the bookie that is offering the free bet.
Let’s say that the minimum bet, to qualify for the maximum free bet, is £20 and that the odds to back the selected horse to win is 3/1.
If the horse wins, £20 x 3 = £60 will be won.
If the horse loses, £20 (the stake) would be lost.
Secondly, the same horse that was backed to win must now be layed on a betting exchange to lose.
The exposure must be identical to the amount that will be won if the selection wins i.e. £60.
Let’s say that the odds to lay the horse is 4.0.
The stake must therefore be £60.00 /(4.0 – 1) = £60/3 = £20.
If the horse loses, £19.00 (£20.00 – 5% commission) will be won.
If the horse wins, £60.00 would be lost.
The profit/loss is identified in the following table:
At best, a break-even situation is achieved.
If the selected horse can be layed at odds of less than 4.0, the potential loss will be less than £1 and a profit may even be made on the two bets.
If the lay odds are greater than 4.0, the potential loss will be greater than £1.
The greater the lay odds are, the greater is the potential loss.
That’s the qualifying bet dealt with.
Now let’s deal with the free bet.
Let’s say that the free bet is worth £20 and that a minimum profit of £5 on the bet is to be made.
Firstly, a horse is backed to win, using the free bet, with the bookie that has offered the free bet.
Let’s also say that the odds to back the selected horse to win is 7.2.
If the horse wins, £20 x 7/2 = £70 will be won.
If the horse loses, the £20 free bet will be lost.
Secondly, the same horse that was backed to win with the bookie must be layed to lose on a betting exchange.
Let’s suppose that the odds to lay the horse on the exchange are 4.6.
The liability on the lay bet must not exceed £70 (the potential win on the first bet) minus £5 (profit).
This equals £65.
At lay odds of 4.6, the stake must not exceed £65/ (4.6 – 1.0) = £65/3.6 = £18.05.
If the selection is layed on the exchange to lose at odds of 4.6 and the stake is £18.05, the liability is £64.98 if the horse wins and £18.05 minus £0.91 (assuming 5% commission on winning bets) would be won if it loses.
The table below summarises the two possible outcomes of the race, from the selection’s point of view, and the profit:
If the selection loses, £17.14 would be won but the £20 free bet would be lost.
So, we have placed ourselves in a position such that, no matter what the outcome of the race is, we will win.
Now let’s combine the two tables to determine what the overall effect of the two sets of bets is: