Jul 29 2008
An introduction to arbitrage betting
What is arbitrage betting?
Betting arbitrage, also known as surebets, or sports arbitraging, is a particular case of arbitrage arising in sports betting due to either bookmaker’s different opinions on event outcomes or plain errors. Arbitrage betting is a market phenomenon caused by bookmaker differentiation when offering odds on a certain match. Arbitrage betting is both fun and profitable.
An arbitrage opportunity means that you are able to bet on all possible outcomes of a certain event at odds that guarantee you profit regardless of the final outcome of that event. Therefore, such opportunities are widely known as “surebets” or “surewins”.
Most sports events have 2 possible outcomes (no draw result, e.g. baseball, basketball, tennis, hockey, football) or 3 possible outcomes (draw result possible, e.g. soccer). Betting on these outcomes is the most widely spread type of betting, known as “line betting”. Arbitrage opportunities occur when a bookmaker’s odds on a certain outcome of the event fluctuate compared to the rest of the market.
By placing one bet per each outcome with different betting companies, the bettor can make a profit. As long as different Bookmakers are used for arbitrage betting the bookmakers do not have a problem with this. Each Bookmaker will still make profit due to their calculations.
In the bettors’ slang an arbitrage is often referred to as an “arb”; people who use arbitrage are called “arbers”. A typical arb is around 2%, often less, however 4%-5% are also normal and during some special events they might reach 20% or even more.
Why do arbitrages occur?
The main reason why arbitrage opportunities occur is bookmaker differentiation. An upcoming sports event typically has 3-4 leading bookmakers that are usually the first to offer odds. Usually, most other bookmakers who do not have the necessary expertise, knowledge or resources to closely follow the given championship wait for the leaders to establish the “market” before adjusting their own odds. There is always a third group of bookmakers who have their own views or try to be attractive by offering above-average odds, leading to arbitrage opportunities.
The second reason why arbitrages occur is bookmaker hedging. A bookmaker often seeks a hedge against a potential loss, thus creating an arbitrage.
Let us give you an illustrative example of how an arbitrage betting occurs:
Sport: Women Tennis WTA
Opponents: SZAVAY, AGNES vs. PENNETTA, FLAVIA
Court: Clay, Hungary Open
The market on the above game opens at 1.80 for the SZAVAY, AGNES versus 2.10 for PENNETTA, FLAVIA, leaving a 3% margin for the bookmaker.
As time passes, bookmaker A accumulates $15,000 on SZAVAY, AGNES and only $1,800 on PENNETTA, FLAVIA. Should SZAVAY, AGNES win, this bookmaker would lose $10,200 (payouts of $15,000 x 1.8 less the amounts wagered of $15,000 and less $1,800 wagered on PENNETTA, FLAVIA). The bookmaker’s goal, at this point, is to stop accumulating wagers on SZAVAY, AGNES by lowering the odds to 1.65 and at the same time become more attractive on PENNETTA, FLAVIA by raising the odds to 2.4. The rest of the market stays the same thus creating a surewin of 2.86% between bookmaker B who still keeps SZAVAY, AGNES at 1.8 and bookmaker A who has PENNETTA, FLAVIA at 2.4 odd.
Every bookmaker’s goal is to try to secure a margin on each event offered by adjusting their odds according to the desired margin. As people often wager disproportionately more on one of the outcomes (e.g. SZAVAY, AGNES to win) bookmakers try to hedge themselves by attracting wagers on the other outcome in order to reduce their net loss in case the public wins. This can be achieved by lowering the odds on SZAVAY, AGNES and raising the odds on PENNETTA, FLAVIA. As a result, the bookmaker remains intentionally “exposed” with respect to that outcome with the clear view that this is required for a successful hedge. As there is no reason for the rest of the market to change, the bookmaker just created an arbitrage opportunity.
Numerous such situations occur daily and are usually created by bookmakers on purpose, so they can hedge their exposure.
For any moneyline betting event (player A vs. player B) an arbitrage will be possible when [(OddA)x(OddB)]/(OddA+OddB) > 1.
For the above example (1.8 x 2.4)/(1.8+2.4)= 4.32/4.2 = 1.028 > 1
If you bet 571.43$@1.8 at Bookmaker A and 428.57$@2.4 at Bookmaker B, you will earn 1028 no matter who the winner is. The total staked wagered is 571.43+428.57 = 1000.
So this arb will bring you 28$ as sure profit.
Staking in arbitrage betting
Arbitrage Betting involves relatively large sums of money. Stakes are bigger than in normal betting while another variety, betting investment, means placing relatively small bets systematically on overvalued odds most of which will lose but some win thus making a profit.
