is arbitrage betting?|
An arbitrage opportunity occurs when price discrepancies allow you to place bets that cannot lose. There are two types of arbitrage. You can either back all possible outcomes in an event (Book arbitrage), or back and lay the same selection at different prices (Back/Lay arbitrage).
A book arbitrage opportunity is available whenever the book percentage for an event is under 100%.
Due to the proliferation of online betting sites and the improved value provided by betting exchanges, underround books are now occurring on a regular basis. The emergence of odds comparison sites has made life even easier for arbhunters.
Once you have found an underround book, however, you still need to work out what sort of stakes to place in order to obtain a guaranteed profit. That's where Arb Cruncher comes in.
Book arbitrage example
Bookmaker A offers 2.20 for Borg and 1.72 for McEnroe. Of course, you cannot make a profit by backing both players at these prices, as the book percentage is 103.59%.
However, if Bookmaker B offered 1.91 for McEnroe, you would then have a book of 97.81%. This means that you can earn a guaranteed profit by backing Borg with Bookmaker A and McEnroe with Bookmaker B. Let us assume that you want to spend £500 on this arb.
Where does this figure of £11.19 come from?
If Borg wins, you would win £278.63 with Bookmaker A (1.20 x 232.36) and lose you stake of £267.64 with Bookmaker B. The difference between these figures is £11.19.
On the other hand, if McEnroe wins, you would win £243.55 with Bookmaker B (267.65 x 1.91) and lose your stake of £232.36 with Bookmaker A. The difference between these figures is also £11.19.
Book arbitrage example screenshot
This is a screenshot of the above back arbitrage example. You can obtain the book percentage by just entering the prices and clicking Calculate. There is no need to select or enter any stake constraint.
You can also arb between a selection's Back price and Lay price. This is possible whenever a bookmaker prices up a selection at a higher price than the Lay price available for the same selection on an exchange.
Bookmakers can be slow to adjust the price of a favorite whose price is plummeting on the exchanges, allowing you can to make an easy profit by backing high with the bookmaker and laying low on the exchanges.
Back/Lay arbitrage example
The Lay price of a horse called Steamer has dropped rapidly from 9.00 to 7.50 on Betfair. However, Paddy Power is still offering 9.00 for the horse. There is a huge amount of liquidity available at this price, but Paddy Power is only accepting bets up to £250. Your Betfair commission rate is 4.4% and you would like to exploit this arb to the full.
Where does this figure of £38.49 come from?
If Steamer were to win, you would win £2,000 (250 x 8) from Paddy Power, but you would also have to pay out £1,961.51 (301.77 x 6.50) on Betfair. The difference between these figures is £38.49.
On the other hand, if Steamer were to lose, you would collect the backer's stake minus commission of £288.49 (301.77 - 4.4%) on Betfair and lose your stake of £250 with Paddy Power. The difference between these figures is also £38.49.
Back/lay arbitrage example screenshot
What is the difference between arbitrage and trading?
An arbitrage requires the concurrent availability of all prices. For example, backing a horse with a bookmaker in the belief that its price will fall on the exchanges is an example of trading. However, backing a horse with a bookmaker when it is also currently available to be layed at a lower price on an exchange is an arbitrage.
In other words, an arbitrageur exploits existing price discrepancies, while a trader anticipates price movements.
How do I identify an arb?
An arb is available on an event when its book percentage is below 100%. The book percentage is the total of all the probabilities represented by an event's prices. The total of the mathematical probabilities in any single-outcome event is always 100% (Heads 50%, Tails 50%). Each bookmaker's book is always over 100% (overround) because of the profit margins built into his prices. However, you can often obtain an underround book by taking the best available prices from different bookmakers.
How do I find arbs?
There are 4 ways of finding arbs:
|Find by yourself||Scour betting sites and odds comparison sites to find your own underround books. The trick is to look for early prices that have not yet been adjusted. For example, underround books can often be found in the early prices quoted for first round tennis matches. These matches are normally priced up by WHill, Stan James and Bet 365 on Sunday. Betfair will also have markets in the matches available on Sunday. Place your bets on Sunday, as any underround books are highlighted by Monday morning's Racing Post, prompting a realignment of bookmakers' prices. 2-balls and 3-balls in golf are another rich source of early underround books.|
|From odds comparison sites||Many odds comparison sites
now have special "surebet" sections that list underround books. Most
of these are automatically generated, so care should be taken to check
not only the availability of the prices, but also the reliability of
the bookmakers quoted and the consistency of their rules. Some of the
better known odds comparison sites offering this free service are OddsExchange,BetBrain,
(Arb Cruncher is not responsible for the reliability or accuracy of
the prices or recommendations contained in these sites.)
|Sign up to an Arb Alert service||The most expensive option is to sign up to a subscription-based service that delivers notification of underround books either by email or by SMS. Unfortunately, some of these services have acquired dubious reputations. Their use of spiders to trawl the Web for arbs often generates a huge amount of non-existent or illogical arbs. Dates, events and players can all get mixed, rendering the so-called arb meaningless. Even if they do find a valid underround book, the sheer number of their members piling in for their guaranteed profit leads to a rapid price alignment that actually removes the arb opportunity. This self-defeating causality generates frequent complaints from paid-up users about the unavailability of the notified arb. Arb Cruncher recommends extreme caution with these services.|
How does commission affect the book percentage?
If you are backing all the selections on the same betting exchange, Arb Cruncher does not factor the exchange commission rate into the book percentage. This is because the commission does not affect the intrinsic value of the prices - it merely operates as a tax on your overall profits.
If, however, you are backing one of the selections on an exchange, Arb Cruncher does factor the commission rate into the calculated book percentage. This is because the commission rate modifies the effective exchange price and could ultimately make the difference between an underround and an overround book.
Are there any other risks associated with arbitrage betting?
Although the prices may guarantee a certain profit in theory, there are a few factors that could prevent the actual implementation of the arb:
|Maximum stake limits||Before placing your bets,
you should always check that none of the bookmakers in the arb have
a maximum stake limit that could prevent you placing your full stake.
Remember that all betting exchange prices are effectively subject to some sort of stake limit, so keep a close eye on the available liquidity at not just the best price, but also the 2nd and 3rd prices in line (just in case all the money at the best price gets hoovered up).
|Before placing all bets in
an arb, check that their prices are still available (don't rely on bookies
holding their prices quoted in the Racing Post). Save time by opening
several browser windows (CTRL+N), or by simultaneously checking prices
on the Internet and by telephone. You should also bet on all legs of
the arb at the same time using Internet and the phone.
Prices on the exchanges can change very quickly, so make sure that you place any exchange bets first while the price lasts.
|Unfortunately there is a long
list of bankrupt and fraudulent betting sites that have deprived punters
of their legitimate winnings. Arbhunters therefore have to be streetwise
in their choice of bookmakers. There are two useful sites that help
you identify the more reputable bookmakers:
Review: Assigns rankings to bookmakers (sportsbooks) on the
basis of continuous monitoring of service and complaint levels. Avoid
bookmakers ranked D+ or less!
Independent Betting Arbitration Service: Provides independent resolution of disputes with UK and Irish bookmakers registered with IBAS. The site contains a list of registered bookmakers that is a useful yardstick of respectability.
You should also keep an eye on messageboards, like Punter's Lounge and Bookiebusters, where punters warn each other of dubious bookmakers.
Different bookmakers' rules
|Bookmakers often have different policies for settling bets with irregular outcomes (eg postponed/abandoned soccer matches, withdrawal of tennis players during a match etc). This can drastically affect the success of an arb, so you should check that the bookmakers share the same policies for these events before you place bets with them.|