Level stakes when laying is actually by using a liability.

When you do your first method $1 on a $2.50 and lost $1.50 that is actually not level stakes as your loss varies. Its not level.

In my opinion I have seen people fool themselves with the variability in the returns. They think they are going well but when you convert it back to the liability method they are actually losing. Long term I have seen those people fail.

IMHO use the liability method only as you are keeping your losses the same and your profit variable (which is the same as backing with a set amount).