What is arbitrage betting?
Arbitrage betting, or ‘arbing’, is a system where gamblers bet on all possible outcomes of an event with the intention of guaranteeing a profit. Now, you’ve probably heard of a few half-baked ‘risk free’ betting strategies and are wondering if this one is any different. With arbing, under the right conditions, it is actually possible to guarantee a profit.
To guarantee a profit, however, there needs to be an appropriate discrepancy between the odds offered at a bookmaker and a betting exchange, such as Betfair. The simplest and most common arbs are placed on events in which there are only two possible outcomes, such as a tennis match. Providing the odds allow for arbing, by backing an outcome at the bookie and betting against it at the exchange, it is possible to guarantee a profit regardless of the result.
How does it work?
This is where things can start to get a little confusing – arbing is a mathematical process which relies on using calculations to determine whether there is an opportunity to arb. The most common scenario in which this happens is when the odds given to an outcome by a bookmaker are higher than the lay odds offered against that outcome at an exchange.
Whereas bookmakers set their own odds, the odds at exchanges are driven by supply and demand and are therefore more competitive. Discrepancies in odds may arise either due to differing opinions of bookmakers, a bookie mispricing odds so that they are higher than the rest of the market, or when they are too slow to react to more competitive odds at other sites.
Bookies rely on betting margins – the difference between the odds offered and the true probability of an outcome – in order to make a profit. In a fair market, the implied probability — the odds converted into percentages— of each possible outcome of an event would total 100%. If this sounds confusing, imagine there is an event with only two possible outcomes in which each outcome has exactly 50% chance of occurring. If the bookmakers offered the true odds of 1/1 on each outcome, a £10 bet would land you £10 profit if you predicted correctly.
Sounds great for the player, but bookies simply can’t make a profit in this scenario. Here, there is a 50-50 chance of either outcome occurring, which makes a 100% market. If the odds were evens, on average the bookie would pay out just as much as it wins. In order to make a profit, bookies price the market above 100% so that the odds don’t reflect the true probability of an event occurring. The margin, or ‘overround’, is whatever percentage over 100 the market is priced at. So if the total implied probability is 103%, the margin is 3% and on average bettors would lose a certain sum of money for every pound wagered over time.
Arbing is possible when the odds on one outcome at a bookmaker and the lay odds against that outcome at an exchange result in a market price of below 100%. For this to happen, the lay odds need to be lower than the back odds.
Here’s an Arbitrage betting example
Say you want to wager on a tennis match at a particular bookie. Using decimal odds, each player is priced as follows, with the implied probability in brackets:
Player A – 2.50 (40.0%) Player B – 1.50 (66.7%)
Here, the market price is 106.7%, which gives the bookie an edge and allows them to make profit. Now, let’s say an exchange offers the following lay odds on Player A:
Player A not to win – 1.73 (57.8%).
If you back player A at the bookie and bet against them at the exchange, the market margin will be 97.8%, meaning there’s an opportunity to arb. By placing a lay bet at an exchange you are effectively taking on the role of the bookmaker, so the returns are different to back betting. If you placed a £10 lay bet on Player A not winning at 1.73 odds, you win £10 if the bet comes in but lose £7.30 if player A wins.
Now, if you stake £100 on each bet your potential profits are as follows:
|Back bet wins||Lay bet wins|
|Bookie||Win £150||Lose £100|
|Exchange||Lose £73||Win £100|
As you can see, this means you’ll win if the back bet comes in, but you’ll only break even if the lay bet wins. To guarantee a profit, you must adjust your wager. So let’s say you still wager £100 on the back bet but £140 on the lay:
|Back bet wins||Lay bet wins|
|Bookie||Win £150||Lose £100|
|Exchange||Lose £102.20||Win £140|
This way you can make a profit on your total stake, regardless of the outcome. However, you’ll have to factor in the commission charged by the exchange. At Betfair this is 5% of your winning bet, so if you win on the lay you would pay £7 commission on your £140 win, leaving you with £33 profit once you factor in the stake lost on the back bet. Most arbers use online calculators to work out which stakes will result in an even profit across both potential outcomes.
This is just one hypothetical example and there are many different situations which can potentially allow for arbing. For example, if there was an adequate discrepancy in the odds, you could potentially arb by backing Player A at the bookie and backing Player B at the exchange or another bookie, rather than placing a lay bet.
How often do arbs appear?
Opportunities arise every day, but how often you can place arb bets depends on how much time and dedication you can put into it. As betting odds fluctuate frequently, arbers have to be constantly on the lookout for potential opportunities as they can vanish just as quickly as they appear. If you are able to spend a considerable amount of time arbing, then it is possible that you could find opportunities daily, but for most people this is not a realistic option.
Where do people find arbs?
Experienced arbers concentrate on searching unpopular markets for potential opportunities. This is because betting sites make most of their money from big sporting events and are therefore more attentive to these markets, meaning you are less like to find mispriced odds.
Arbers also often strike when markets have only been opened a short time. As it gets closer to an event, more information becomes available and more money is wagered, meaning the odds come closer to the true price of the market.
An exception to this is horse racing, which is popular among arbers due to the particularly volatile markets. As most racing bets are placed shortly before the race begins, this can result in a delay in a bookie adjusting their prices to make them in line with the rest of the market. However, this also means more risk to arbers. As the odds change very quickly, if you’re not fast enough you may place a back bet only to realise the odds have changed and made your arb impossible to profit from.
Whilst there are free sites which offer tips on arb bets, even just a small number of people betting on suggested markets can result in a change in odds, therefore preventing any more arbs, as well as raising the suspicions of betting sites.
What are the downsides?
As with any betting strategy, no matter how foolproof it may seem there are always some downsides. It’s fair to say that arbing is far from a simple process, and the time, effort and skill it takes to carry out effectively means it’s not a realistic proposition for most regular bettors.
Risk to your account
The primary and most obvious downside to arbing is that it is not something that bookies look very fondly upon. This is because arbing can potentially cost bookies profit, and if the betting site you’re using catches on then you risk having your account restricted, suspended or even closed.
Bookmakers are usually pretty savvy to bettors who are trying to use strategies to gain an advantage, and there’s a chance they’ll catch on if the arbing is not discreet. Things like new bettors wagering large sums, placing odd stakes, many people placing the same bets, interest in obscure markets and just general betting patterns are all things which may alert a betting site to arbing.
Low profit margins
Though arbing can reduce risk when gambling, it isn’t a get rich quick strategy. The discrepancies between odds are usually small, as it is very rare for a bookie to wildly misprice an event or be very slow to react. This means profit margins for arbers are kept pretty narrow – most arbs only result in 1-5% profit.
Due to the small profit margins, you’re going to have to invest some pretty serious money if you want to justify the time and effort you need to spend to find arbs. Of course, some will say that it is essentially a no-risk investment, but most regular bettors can’t afford to invest hundreds or even thousands of pounds just to make a small profit. Even if you can, you may be understandably very reluctant to wager such large sums of money. And as with any betting strategy, there is always a chance that something could go wrong.
Even if the odds line up, an arb can only work if the betting site permits you to stake the amounts required to guarantee a profit. Max stakes particularly fluctuate at betting exchanges, and they can often be restricted when betting on horse racing and more obscure markets, which can make arbing difficult. Stakes can also be more restricted when markets have only been opened a short while, which can further complicate arbing.
How much you can wager at a site like Betfair depends on how much money is in the exchange, and you can only place a lay bet providing there is a bettor matching your lay with a back bet. So even if the odds work out, you may not be able to place the wager you need to negate any risk or secure a profit.
Not entirely risk-free
Whilst some claim that arbing is a risk free, any experienced gambler will tell you there’s no such thing when it comes to betting. Aside from the risk arbing poses to your account, there is also a potential risk to your wallet. This is because arbing is always subject to human error, and as a game of very fine margins, making a slight miscalculation or misjudging a situation can result in heavy losses. Because arbing can only generate small profits but requires large investment, the big risk is that one mistake can undo the time and effort spent placing earlier bets.
Due to the volatile nature of some markets used for arbing, things can change in the blink of an eye. This means that there’s always a risk that you may place a lay bet, only to go to the betting exchange to see that the odds or max stakes have changed. If you are unable to meet the requirements at the exchange you may risk a big loss. There is also the potential risk that bookmakers may refuse to pay out your winnings if they believe you are arbing, which is something you should be aware of.
Time and effort
Whilst the idea of arbitrage betting may seem attractive, the truth is that it requires a lot of patience, time, effort and skill. To make any kind of money from arbing you have to spend a lot of time researching the market and calculating odds – it’s not as simple as logging onto your phone during your lunch break and finding an easy arbing opportunity. This, coupled with low profit margins, makes arbing a slow process which requires significant risk capital and time investment.
To effectively arb you will need also many accounts across different bookmakers and exchanges, and you will also have to keep track of all the bets you’re placing, so it can be easy to get in a muddle. In addition to this, whilst there’s online arbing calculators you can use, you still have to be able to spot good value odds and potential opportunities, as simply putting every single odds you find into a calculator will be incredibly time-consuming.
Arbing is a popular strategy among certain betting circles due to its potential to negate risk and secure profit. However, this is only achievable by investing significant time, money and effort, which means for many regular gamblers arbing simply isn’t worth it.
Frequently Asked Questions
Is arbitrage betting legal?
Yes, you are not breaking any laws by arbitrage betting. However, it is frowned upon by bookies, and you may risk having your account restricted or suspended if you get found out.
Can you place arb bets on football?
In theory, yes. However, having more than two sections makes the arb calculations much more complex and makes it more difficult and time consuming to find discrepancies in odds as you will need to factor in three potential outcomes.
Can you do an arbitrage bet with two bookmakers?
In theory you could place an arbitrage bet using two different bookmakers providing there was a discrepancy in the odds. However, bookies are very attentive to each other’s odds and this means mispricings between bookies are rare.
Can you do arbitrage betting using odds promotions?
Sometimes bookmakers, especially new betting sites, offer enhanced odds as welcome bonuses to customers which may seem like ideal arbing opportunities. However, these kind of offers usually come with strict conditions, such as low maximum stakes and so forth, which may restrict arbing opportunities.
Is arbing the same as matched betting?
The concept is the same, yes. Matched betting is basically arbing, except that matched bettors are taking advantage of welcome deals and promotional offers from bookies and using those funds to place one half of the arb stake. Also, as matched betting uses ‘free bets’, it doesn’t depend on a bookie having higher odds than an exchange – the odds can be similar or lower.
Is there arbing software?
There are softwares and sites available which are designed to locate arbing opportunities, although these usually require expensive subscriptions.