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The Outcome Market / Not a book
A price set by traders, and a sale before the result
Why an event contract is not a fixed-odds bet
The same event can be a fixed-odds bet, an exchange trade and an event contract at once, and the differences are not cosmetic. Who sets the price, where the margin sits, whether the position can be sold before the result, and which regulator is looking all change with the venue.
Desk spec
- market
- 62.0%
- book implied
- 58.0%
- gap
- 4.0 points
- book overround
- 6.2%
the contractA question turned into a tradable share. It pays a fixed amount on yes and nothing on no, and its price sits from 0c to 100c. On the samples it pays 1.00 and trades at 62c.
the priceThe market's implied chance of the event, so 62c is a 62.0% chance. The bid and the ask bracket it, and the 2c between them is the first cost a trader pays.
the settlementThe named source publishes the answer, and the payout follows. Of 200 sample contracts, 176 settled from the source and 4 were voided and refunded.
Direct answerA fixed-odds bet is priced by a bookmaker that takes the other side, builds its margin into the price and cannot be sold back before the result. An event contract is priced by traders on a book, has no house margin, can be sold before settlement, and is settled by a named source. On the samples the same event is 62.0% on the market and 58.0% at a book.
Three venues, one event
The differences cluster into four questions: who is on the other side, where the margin sits, whether the position is tradable before the result, and who regulates the product.
Sample G - one event priced on three kinds of venue
| Question | Fixed-odds book | Betting exchange | Event contract |
|---|
| who is the counterparty | the bookmaker | another user, matched | another user, matched |
| where the margin sits | in the price, 6.2% overround | in commission | in the 3.3% spread |
| can it be sold before the result | usually only by cashing out | yes, at the lay price | yes, at the bid |
| the underlying | usually sport | usually sport | any event with a source |
| sample price | 58.0% | - | 62.0% |
sample G - the margin, two ways
a book with a 6.2% overround on a two-way market:
implied probabilities sum = 106.2 -> overround 6.2%
so both sides are priced longer than the true chance
an event contract with a 2c spread on a 61c mid:
spread as a share of mid = 2 / 61 = 3.3%
the market's 62.0% against the book's implied 58.0%:
gap = 62.0 - 58.0 = 4.0 points
so the same event is priced 4 points apart on the two venues,
and the cheaper side is not free - it carries the spread instead.
What the difference means for a reader
A book's price includes its margin, so a reader pays for the book's view of the event plus its cut. A market's price does not include a house view, but it does include the spread, and prices can be wrong in a way a book's are not: a thin market can misprice an event because few traders are looking at it. Neither venue is automatically better; they are different instruments with different costs and different risks.
sample G - the same 100.00 committed, both venues
at the book, implied 58.0%:
stake = 100.00
potential return at a fair 58% = 100.00 / 0.58 = 172.41
net if it wins = 172.41 - 100.00 = 72.41
net if it loses = -100.00
on the market, buying at 62.0%:
100.00 at 62c = 161 contracts, 99.82 paid
if yes = 161 x 1.00 = 161.00 -> +61.18
if no = 0.00 -> -99.82
so the market pays less on yes and loses slightly less on no,
and can be sold before the result while the book cannot.
This page is a comparison of mechanisms, not a recommendation of either. The sample prices, the overround and the spread are invented and are not quotes from any real venue. A reader should compare the actual rules of the products in front of them, including whether each is legal where they are.
Choosing between a book and a market
- Ask who is on the other side, because it decides who wins when you are right.
- Price the margin in, whether it is an overround, a commission or a spread.
- Check whether the position can be sold before the result.
- Read which source settles it, because a book and a market may use different ones.
- Check the product is permitted where you are, and that you are old enough to use it.
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