Arbitrage betting

Arbitrage refers to the practice of taking advantage of a price difference between two or more markets. Extending the concept to sports betting we get arbitrage betting.

In certain situations, bettors can take advantage of different odds offered by different bookmakers by placing one bet per each outcome on a particular event. The development of the internet has made arbitrage betting easier due to a number of odds-comparison websites and betting exchanges. In this case, bettors act like market makers.

In order to be profitable, arbitrage betting involves large sums of money with less than about 5-10% returns on the initial investment.

As a general rule, bookmakers disapprove of betting arbitrage, penalizing accounts suspected to be involved in arbitrage betting.

Check the following example for a better understanding on how the arbitrage betting works. Assume a tennis match between Rafael Nadal and Roger Federer. Checking the betting offer from two bookmakers we get the following odds for each possible outcome:

	Bookmaker 1	Bookmaker 2
Outcome 1	1.25	1.43
Outcome 2	3.90	2.85

In a previous article we have explained how bookmakers calculated the odds in order to ensure a profit margin. Due to this aspect, the sum of the inverse of all outcomes of an event will always be greater than 1. In arbitrage betting, the idea is to find odds at different bookmakers, where the sum of the inverse of all the outcomes is below 1, meaning that the bookmakers disagree on the chances of the outcomes. This discrepancy can be used to obtain a profit.

In our example:

Bookmaker 1

1/1.25 + 1/3.90 = 1.056 with a profit margin of 1- (1.25 * 3.90)/ (1.25 + 3.90) =5.34%

Bookmaker 2

1/1.43 + 1/2.85 = 1.051 with a profit margin of 1- (1.43 * 2.85)/ (1.43 + 2.85) =4.79%

Now if a bettor places a bet on the outcome 1 at bookmaker 2 and outcome 2 at bookmaker 1, we get: 1/1.43 + 1/3.90 = 0.956. In this case, bettors can speculate.

So if we place $100 on the outcome 1 with bookmaker 2 we could generate $143 (100 * 1.43 = 143) and $36.67 (100 * 1.43/ 3.90= 36.67) on the outcome 2 with bookmaker 1 we could generate also $143 (36.67 * 3.90= 143). In total, we have invested $136.67 with a sure win of $143 since we covered all possible outcomes. The difference between 143-136.67= $6.33 (4.6%) is our profit.

Although arbitrage betting is a sure thing, there are a number of risks. Learn more about arbitrage betting

Arbitrage is an extremely fast-paced process with a median lifetime of around 15 minutes, after which the difference in odds vanishes through betting activity.

Human error is not uncommon in arbitrage betting. Due to the high amount of liquidity in order to produce a profit, even the slightest human error can produce significant losses.

Even if there are a few bookmakers who openly tolerate arbitrage betting, most bookmakers will freeze your account or cancel your bets if you are suspected to perform arbitrage betting. The easiest way to detect an arbiter is to check the stakes. Normal stakes are whole numbers like: 1, 3, 5, 10, 50 and so on. An arbiter will use stakes with decimal numbers like this: 2.59 or 34.17 or 68.93 because that’s the exact amount he has to bet in order to make a profit. If he rounds up the stake, he might not get a profit.

As a conclusion, in order to be successful as an arbiter you need lots of time, experience, dedication, discipline, and especially liquidity, but once you have these the results are better than any other job your could ever get.