What Is Arbitrage Betting
One very popular form of entertainment that has become a mainstay in Western culture is betting. Sports betting, in particular, has boomed in popularity as punters look to try and make correct predictions about their favourite sports. Sports betting can be very fun when used in tandem with the viewing of a sporting fixture.
However, Many bettors try to make more profits during their gaming sessions and, as a result, look to gambling strategies to help them in this approach. One gambling strategy which has proved to be very effective over the years is known as arbitrage betting. But what exactly is arbitrage betting and does it make for a good side hustle? We will answer this question and more in this article as we take a look at arbitrage betting and everything this strategy provides.
Arbitrage Betting Explained
Arbitrage betting is a trading technique which benefits from price differentials in two different markets to ensure profits. Arbitrage betting is a common practice seen by traders on the stock exchange. The principle is applied in a similar fashion to sports betting.
Arbitrage betting involves placing bets on every outcome of an event to guarantee a win no matter what the result. Whereas gambling carries high risk, this form of betting is more of a low-risk, medium-yield investment strategy.
Arbitrage Opportunities From Market Inefficiencies
The concept of market efficiency is an important one to understand when beginning to place arbitrage bets. Basically, all betting markets are reliant on information to a set price, the accuracy of this information and who has access to it, as well as how quickly it is accessed.
If everyone had 100% accurate information, then the market would be efficient, and there would be no opportunities for arbitrage betting. The same applies, but the other way around: if the information were accurate, the market would be efficient.
No market is 100% efficient, and the dispersion between information quality and the speed at which it is available creates opportunities for arbitrage betting.
Arbitrage Calculator
An arbitrage calculator works similar to most other betting calculators available. An arbitrage calculator allows you to quickly calculate your bets to determine the expected profits and losses from each outcome of your bet. This is very useful as it helps you quickly and efficiently improve your betting strategy without having to do lots of complicated calculations yourself.
Here is a quick step-by-step on how to use one for yourself:
- Input your total stake.
- Input the odds for outcome 1 and the commission (if you are arbing between bookmakers, set this as 0)
- Repeat for other outcomes.
- The arbitrage calculator will then automatically let you know how much you need to stake on each outcome and your profit.
How To Arbitrage Bet
There are two primary forms of arbitrage betting, and these include:
- Odds arbitrage
- Bonus arbitrage (matched betting)
A fair market has an implied probability of 100%. Traditional bookmakers build a margin into their odds, which helps them make a profit by pricing the market over 100%. Arbitrage betting looks to effectively reverse this, allowing you to exploit discrepancies across bookmakers so that the probability of the odds is below 100% and, therefore, it is more favourable for the bettor.
The most common form of arbitrage betting is where the exchange lay odds are lower than the back odds offered by a different bookmaker. The idea is to cover all eventualities across bookmakers to lock in profits.
Let's say you want to bet on a match between Barcelona and Sevilla. The odds available are listed below:
|
Sevilla to win |
Barcelona to win |
Market Margin |
|
|
Odds |
2.4 (41.67%) |
1.55 (64.52%) |
106% |
Now, let's imagine you could place a lay bet with odds of 2.1 for Sevilla not to win. The implied probability would look like this:
|
Sevilla to win |
Sevilla to not win |
Combined Market Margin |
|
|
Odds |
2.4 (41.67%) |
2.1 (47.62%) |
89.29% |
We highly recommend using an arbitrage betting calculator as the calculations can get very complicated. To shorten, if you wanted to place a stake of £100 on Sevilla to win, you would have to place a lay bet of £115.38. To understand why, we recommend placing the information we have provided you with into an arbitrage calculator so you can see for yourself.
The overall profits would look like this:
|
Outcome |
Bookmaker |
Exchange Market |
Profit/loss |
|
Sevilla wins |
+£140 |
-£126.90 |
+£13.08 |
|
Sevilla loses |
-£100 |
+£113.07 |
+£13.07 |
As you can see, if you placed this bet, you would make £13.07 or £13.08 profit regardless of the outcome. Bonus arbitrage betting, otherwise known as matched betting, is pretty much the same except the first bet you look to try and break even to unlock a free bet. You then do the same steps as previously mentioned, except now one of your bets is free, leading to more profits.
Benefits Of Arbitrage Betting
The primary benefit of arbitrage betting is the small profits that can be consistently made. Arbitrage betting will never provide you with big paydays but can provide a steady stream of small profits if done correctly and efficiently.
Arbitrage betting also isn't gambling, as your bets are not based on luck and instead based on mathematical calculations. These two factors together make arbitrage betting a unique form of investment rather than a form of gambling.
Summary
In conclusion, arbitrage betting is a great strategy for risk-averse bettors who are looking to make some small profits or for those looking for an alternative, low-risk, low-reward investment strategy.
