Arbitrage Betting
Arbitrage betting is a sports betting strategy designed to take advantage of pricing discrepancies in the betting markets. It involves placing two (or more) wagers on a single sports event, so that all possible. What is arbitrage betting? Arbitrage betting has become one of the most simplest and popular ways to make money online. The term “arbitrage” (commonly referred to as an arb) is a scenario where you.
Arbitrage betting promises risk free returns - the Holy Grail of gambling - so is naturally a very popular topic within the betting community, but how does arbitrage betting work? We have laid out everything you need to know; this is arbitrage betting explained.
Arbitrage betting exploits the opportunity to place proportionate bets on each outcome of the same event with differing bookmakers so that a profit is guaranteed regardeless of the outcome.
What is Arbitrage betting?
Any type of risk-based activity is a search for price-differential. If you can buy widgets from Factory A for €10 and sell them to Retailer B for €15 you can pocket €5 risk free.
A huge proportion of profit generated by the investment banking industry is based on this simple principle - in much more complex form - across a dizzying array of commodities and assets.
Arbitrage betting by comparison is much closer to the simple widget analogy above - it is used by many gamblers to successfully make risk-free profit.
To explain how arbitrage works and why Pinnacle is happy to accept it, we created this short video:
Example of an arbitrage bet
The best way to explain how arbitrage works is through a simple example. Take the odds on a tennis match between Player A and Player B offered by two hypothetical bookmakers - A & B - as illustrated in the table below.
| Player 1 | Player 2 | Margin | Stake | Profit | |
|---|---|---|---|---|---|
| Odds Bookmaker A (BA) | 1.300 | 3.930 | 102.4% | 26.54 | 4.30 |
| Odds Bookmaker B (BB) | 1.420 | 2.900 | 104.9% | 73.46 | 4.31 |
| Arbitrage (Combining Player 1/BB & Player 2/BA) | 1.420 | 3.930 | 95.9% (4.1% profit margin) | 100 |
The margin is indicated for each bookmaker i.e. the edge in their favour (read this article to understand how to calculate betting margins). By cross-matching the odds from Player 2 at Bookmaker A (3.930) with those for Player 1 at Bookmaker B, (1.420) the margin is in the bettor's favour providing a guaranteed return of 4.1% (100 - 95.9 = 4.1). Importantly, your stake needs to be in proportion to the odds as illustrated, which gives a guaranteed return of €4.30 whether Player 1 or Player 2 wins.
This principle can apply to any betting market, beyond just two selections, including spread betting, while it also has wide application in live betting where arbitrage opportunities are constantly available by Backing and Laying in a constantly shifting market. You can also use free bonuses in an arbitrage bet to lock in a guaranteed profit, but the conditions that apply are restrictive.
Why do arbitrage opportunities occur?
Though you may be simply interested in profiting from arbitrage, it is important for context to understand why arbitrage opportunities occur. These are the main reasons:
Bookmakers differing in opinion
Bookmakers taking a specific position or running a promotion
Bookmakers slow to move their odds or simply making a mistake
The first of these is the most common, and is particularly relevant in relation to Pinnacle as our risk-management is regarded as among the best online. As a result, our odds feature more than any bookmaker in arbitrage opportunities, even more so because we don't offer betting promotions.
Potential pitfalls of arbitrage betting
If at this point you are itching to get out there making free money from arbitrage betting, now is time for a reality check, as there is no such thing as a free lunch. Though the mathematical logic of arbitrage is sound there are risks associated with the process of finding and successfully placing the required bets. Here are the most important things to consider before starting out:
Stake limitation & account closure
Limits vary at different bookmakers, which may hinder your ability to properly exploit an arbitrage opportunity. This isn't an issue at Pinnacle, as we offer the highest limits online.
Some bookmakers dislike arbitrage players as they don't fit their desired player profile. As Pinnacle has a unique business model based on volume, we don't care what the betting intent is - we are arbitrage friendly.
Bet cancellation
Bookmakers can cancel bets where mistakes have been made, which would leave you exposed on the other side(s). This can easily wipe out your profits accrued over a long period. Take a close look at the Rules for each bookmaker you intend to use for arbitrage.
Complexity
To fully exploit arbitrage betting, you must have a huge number of funded bookmaker accounts, as well as the time to take full advantage. This involves significant organisation and effort. Many practice arbitrage betting for a living (financial arbitrage) in which time invested must also be measured as a cost. There are many services out there that will do the hard work for you of finding arbs, but they will charge a fee which eats into your profit, and do not eliminate all the risks outlined here.
Fleeting Arb Opportunities
Bookmakers are constantly updating their odds, often using their competitors as a benchmark. As a result arbitrage opportunities can last seconds rather than minutes so time of the essence, and when humans are time-pressured errors inevitably occur. Arbitrage software systems can help in this regard, but cannot guarantee that you won't be left with a naked position - in other words, you cannot cover all the bet options so will incurr risk.
Value betting vs Arbitrage betting
Some bettors argue that arbitrage simply exposes where bookmakers have incorrectly priced a market, and therefore the value is in solely betting with the 'wrong odds'. This idea is much more complex that it appears, and we have a dedicated an entire article to the arbitrage vs value betting argument.
Arbitrage Betting - Getting Started
If you have got this far you should have enough information to consider arbitrage betting. If you want to take the next step then you'll need a Pinnacle account, because having the most competitive odds online along with an arbitrage friendly policy means that Pinnacle features in arbitrage betting opportunities more than any other bookmaker.
Arbitrage is ‘Sure Betting’
In the world of sports betting the art of arbitrage involves wagering on both or all sides of an event with the right combination of odds and stakes in place to make a profit whatever the outcome of that event.
The principle of arbitrage is ‘sure betting‘, supposedly with minimum risk (for the seasoned arbitrageur) and long-term, guaranteed profits.
Surely this is the closest you can come to attaining the “Holy Grail” in betting? Or maybe not?
Despite the apparent rewards on offer the number of worldwide professional sports arbitrageurs is in the low tens of thousands, not more. In comparison, the German stock market employs over 3,200 staff, whilst one of the largest providers of automated arbitrage services, RebelBetting has even fewer subscribers than this number (as we write).
So, why such a relatively small group of customers taking advantage of the so-called ‘guaranteed’ gains averaging between 1.5% and 3.5% per bet (a typical ‘arb‘ provides around 2.5%), with perhaps 15-25% potential profit on the capital employed each month? That’s a far higher reward than any bank, building society, or share dividend offers!
Is Arbitrage legal?
Arbitrage Betting Example
There is no question that arbitrage is legal because the arber is simply exploiting price differences in the market, effectively buying and selling (bets) as any trader does. There is nothing illegal about this.
However, it is understandable that bookmakers are not fond of arbers. Every company has the right (even arbitrarily) to decide who their customers should be and many bookmakers prohibit arbers from their books. As soon as suspicion is aroused bookmaker accounts are quickly limited or even closed.
High Capital Requirement and Personal Characteristics
Successful arbitrage betting ultimately guarantees small returns but the sacrifice is that the process requires large funds. The money is tied-up in the venture for a potentially long period of time.
Pursuing an average 2.5-3.0% profit per betting round and targeting a return of 15-25% of the capital employed per month, the ‘arber’ needs, for example, a starting bank of at least 25,000 € in order to make 5,000 € profit per month.
Wow! A lot of money required at the start to make it worthwhile, and entering the arbitrage arena on these terms will be impossible for many.
Of course, arbitrage betting is a pretty safe investment, but in addition to substantial funds it requires not only great expertise but also some strong personal characteristics to make it possible at all:
Arbitrage Betting Sites
- Many time-consuming calculations must be performed. Ouch, lots of maths!
- Clear and complete records of every transaction must be kept. How boring!
- Discipline and consistency has to be maintained at all times. Far too unsocial!
And lastly, a really stable, reliable and fast internet connection is essential, without any limitations to any bookmaker or exchange worldwide.
Arbitrage Betting Calculator
However, the average punter is perhaps not such a ‘professional’ investor, but bets for fun and/or the excitement of watching an event knowing that money is riding on the outcome. Of course, he hopes to profit from the wager but his are gambles, not investments. Is that the reason why there are so few ‘arbers’ out there and active in the market?