Gambling Mythbusters: Arbitrage
Mention the word arbitrage in the presence of any seasoned sports bettor and you’re sure to cause quite a commotion.
In sports betting, arbitrage, or ‘riskless profit’, is a way to ensure that you win every bet you make by wagering on all possible outcomes of an event using a particular mix of odds offered by different bookmakers.
Known as the ‘best-kept secret in gambling’, arbitrage is considered by many to be the ultimate technique to win every time at sports betting, and to make sure your bankroll is constantly flush with profit.
In this piece we dissect arbitrage and expose some of the myths and misconceptions that have developed around this subject.
What is arbitrage betting?
Arbitrage betting occurs when you spread around your stake by wagering on all possible outcomes of an event with odds that guarantee you make profit no matter what the final result will be.
These kinds of bets are variously known as surebets, miraclebets, surewins or arbs. In every case, the operational principal here is that you make a long-term profit with little or no risk.
Arbitrage is a perfectly legal endeavour which occurs due to the fact that different bookmakers will offer different odds on the same event in order to keep their sportsbooks balanced. A smart arbitrageur is someone who knows how to take advantage of these discrepancies and make a profit.
Understandably, bookmakers aren’t very keen on people who take advantage of a weakness in the system, and in some instances players have reported that their accounts were limited or shut down after they attempted to pull off an arbitrage bet.
How does it work?
The crucial thing in arbitrage is to wager bets at different bookies in such a way that you make a profit on your initial stake whatever the end-result may be.
The easiest way to do this is by wagering on sports events that have only two possible outcomes (e.g. basketball, tennis and American football). Here’s an example of how arbitraging works in an event where only two outcomes are possible:
Arbitrage betting example
|Basketball game: Team A vs Team B - Total Stake: $100|
|Outcome 1||Outcome 2||Profit|
|Win by Team A|
Bookmaker: William Hill
|Win by Team B|
Bookmaker: Paddy Power
In the example above, a correctly staked bet of $100 spread across both outcomes guarantees a win of $110 whatever the result of the game will be. This means you’re guaranteed to pocket a $10 profit due to the discrepancy in the odds the bookmakers offer on this event.
Basically, arbitrage betting requires you to compulsively compare the odds being offered at different bookies in order to find arbitrage opportunities on the market as they happen, quickly calculating the stakes you need to make a profit, and wager your bets before the opportunity vanishes.
Myth #1: Anybody can become an arbitrage expert
Yes and no.
Yes, in the sense that the information and resources you need to take advantage of arbitrage betting is all out there.
No, because it might just be out of reach for you at this moment. Or any moment.
You require certain basic skills and resources in order to be a successful arbitrageur. While everyone can develop these skills and acquire the resources necessary, not everyone has the time, money, effort or inclination to do so.
Arbitrage requires you to have substantial risk capital in place which you can stake in order to make significant profits from single digit margins. For most people, this means being willing to tie up a large chunk of cash for a long time in your arbitraging efforts.
But even if you have the cash, it still doesn’t mean you can make the profit. For arbitrage betting to work properly, you need to devote a lot of time making complex calculations or learning how to use software that makes them for you.
You need to be very disciplined and consistent in your search for arbitrage opportunities, and you absolutely need to have a high-speed internet connection with which you can access odds from any bookmaker in the world at all times.
Myth #2: Arbitrage betting will make you instantly rich
Arbitrage betting may have made a lot of sports bettors and traders rich, however it isn’t a silver bullet that will have your roll in cash in minutes.
Arbitraging requires quite a lot of up-front costs if you want to make it work for you, including having a large amount of risk capital and investing time and money on keeping track of odds and using specialised arbitraging software.
You can still bleed a lot of money if a bet goes wrong (and it can go wrong, see myth #3) and you need to act very quickly in order to seize arbitrage opportunities as soon as they appear.
More often than not, making lots of money through arbitrage is a long, slow process that requires a lot of patience, effort and dedication on your part.
Myth #3: There are zero risks involved in arbitrage
On paper, arbitrage done properly is 100% risk-free, however in practice there are many factors which can ruin your chances of making a profit.
Putting the theory of arbitrage apart, the practicalities are mind-boggling and require a lot of dedication to manage. Different bookmakers may have different rules on bet settlements, such as rules about extra time, which could expose you to unexpected risks when placing your bets. Bookmakers have also been known to make errors in listing their odds, or making payouts, all of which could seriously impact your bankroll solvency.
If bookmakers realise you are using arbitrage betting, they may shut down your account or refuse to pay out your winnings. Moreover, funding several betting accounts with different bankrolls is likely to put a significant financial strain on your credit cards.
Banks or e-wallet companies also enter the equation, especially when you’re moving around large amounts of money very frequently, thus raising their suspicions and risking having your accounts frozen.
Human errors also can creep into your arbitrage strategy, especially if you miscalculate the stakes or expected profit margins.
Arbitrage betting is not an easy thing to pull off and requires several hours of training in order to master the basics and start making a profit off of it. Mistakes are still frequent, but the more you practice the fewer you’ll make.
It’s relatively easy to get started with a little money, just enough to help you get to grips with the system and build capital as you go along rather than making giant profits from the outset. In every case, careful research, lots of preparation and practice are the keys to start making profit.