Liability is a term you will see a lot when you start matched betting and is probably new to you unless you've used betting exchanges before.
So what is liability and what does it have to do with matched betting?
Understanding what liability is and how it is calculated is essential when matched betting as not understanding it could lead to mistakes which could cost you money.
First of all, you'll only see liability being mentioned in relation to betting exchanges and specifically, your lay bets. Using betting exchanges are a key part of matched betting as lay bets allow you to cover all outcomes of an event and essentially make a profit whatever the outcome.
Lay bets work differently to back bets which are generally placed with a bookmaker, as when you place a lay bet, you are betting on something not to happen instead of betting that it will.
For example, if you placed a back bet with a bookmaker on Man Utd to beat Arsenal, you would win your bet if Man Utd won and lose your bet if Arsenal won or if the match ended in a draw. However, if you placed a lay bet on Man Utd on a betting exchange, you would lose your bet if Man Utd won and win your bet if either Arsenal won or the match ended in a draw.
When placing a lay bet there are two things you'll notice on your bet slip.
With back bets, you simply set your stake and know what you will win. So, what is liability when placing lay bets?
Stake = How much you'll win if your lay bet wins
Liability = How much you'll lose if your lay bet loses
In the screenshot from a Betfair bet slip above, you can see that if we placed a £10 lay stake on AC Milan, our liability would be £17.40. This means that if AC Milan lose the match, we make £10 profit and if AC Milan win or draw, we make a £17.40 loss.
As the liability is the amount you stand to lose if you lay bet doesn't win, this is the minimum amount you must have in your exchange account prior to placing your lay bet.
One way to look at lay bets is to think of yourself as the bookmaker. Using the example above, if a punter came to you and said they want to place a £10 bet on AC Milan to win, you'd have to pay them £17.40 if they did and you'd profit £10 if they didn't.
Thankfully, all matched betting calculators like the one found at Profit Squad, take liability into account when calculating the lay stakes for your bets and so you won't need to think too much about it. However, understanding liability is important as it can reduce the risk of making costly errors. To recap on the main points to remember.
Stake = How much you will profit from your lay bet if it wins
Liability = How much you will lose from your lay bet if it loses