I will now dive in into the betting strategy called Arbitrage Betting. As you have learnt from my previous article this is also the simplest and the most low-risk one. It is known by many names – Arbitrage Betting, Sports Arbitrage, “arbing”, Matched Betting, Scalping, Dutching or Sure Bets. They all mean the same thing and I will explain below what it means.
What is Arbitrage Betting?
Arbitrage Betting is the practice of betting on all possible outcomes of an event in different bookmakers in order to lock in a sure profit. I will give you a simple example of how that works. You have, say, a Bayern Munich – Schalke 04 game coming up. Let us have a look at the over/under 2.5 goals market in two different bookmakers, bet365 and Pinnacle. Imagine you get the following quotes from those two bookies:
|over 2.5||under 2.5|
As you see here bet365 anticipate the Over as less likely than Pinnacle do and vice versa for the Under. You can check my article explaining how to translate coefficients into probabilities. This divergence in opinion leads to divergence in coefficients, which creates an arbitrage opportunity for you. You will bet on all possible outcomes in o/u 2.5 using the highest coefficients available and will make a profit. It goes like this:
|over 2.5||under 2.5||you bet||if game o2.5||if game u2.5|
|bet365||1.53||2.6||200 on o2.5||200 * 1.53 = 306||0|
|Pinnacle||1.4||3.05||100 on u2.5||0||100 * 3.05 = 305|
So you have bet a total of 300 and you will return either 305 or 306, by which you have scalped a profit of 5 bucks as a minimum. You managed to place a sure bet.
How does Arbitrage Betting come to be?
You probably ask yourself how often do those opportunities appear in practice and can you make use of them. In order to answer this question, let go through the lifetime of a typical arbitrage bet.
Relative to all betting markets in existence in any single point, markets offering arbitrage opportunities are relatively few. However, since there are tenths of thousands of different betting markets every day, you can still come around hundreds of arbitrage opportunities daily. And yet, dutching pairs appear only occasionally and don’t last long. Why is that so?
In general, bookmakers do their best not to offer arbitrage opportunities to their clients. Retail bookmakers lose from arbitrage and this hurts their profit, so they hate it. However, they can’t help it. It is all routed in their business model.
The bookmaker’s business model – Soft vs Sharp
The two main type of bookmakers are the Market Maker (a.k.a. a ‘Sharp book’) and the Retail bookmaker (a.k.a. a ‘Soft book’). I have explained the difference in detail in my article on sharp and soft bookmakers. For the purposes of explaining the concept of Betting Arbitrage: the market maker books are the ones who are setting and adjusting the odds. The Retail books are the ones who are copying the odds and selling them to the end customer. This is a very simplistic explaination and not always true, but for the most part it gives you the right idea.
If you are interested in reading more about the bookmaker’s business model, there is a great chapter on that topic in the book “The Logic of Sports Betting” by Ed Miller
Efficient Market Hypothesis
Now, according to the Efficient Market Hypothesis, financial markets are moved from information. The same holds true for the betting markets. In fact, there is some serious empirical support to prove that. So, when new information favouring a team or a player appears (say, that an opponent player has been injured), a lot of punters rush to bet this side in a market maker book. Since suddenly that side attracts a whole lot of volume, the market maker book immediately reduces their odds, in order to balance their exposure to the different game outcomes. That process of price discovery based on volume bet on both sides leads to the market maker book having the most accurate odds on the market.
Copy / Paste
Since the Market Maker odds are as accurate as they could be, the Retail bookmaker likes to copy these prices. They don’t like to “discover” those prices themselves, since it is an expensive process. However, copying the prices always comes with a certain delay. This exact moment after the Market Maker has moved the odds and the Retail hasn’t yet copied the new line is the sweet spot for Arbitrage Betting. You bet the not yet moved line in the Retail and the opposite side in the Market Maker and lock in your sure profit.
This is what probably happened in our example above. Since Pinnacle is a Market Maker book (a.k.a. a “sharp”), the price of 3.05 they offered for the Under was the right one. But bet365 (a Retail book a.k.a. a “soft”) didn’t adjust their price on time, so you got an arbitrage opportunity. A minute later bet365 have probably already adjusted their line as well to reflect the Pinnacle’s line.
Soft bookmaker limits
One big issue with Arbitrage Betting is that your accounts used to place the bets will eventually get restricted (a.k.a. ‘gubbed’). In fact the majority of the bookmakers (the ones we call “softs”) will ban you as soon as they suspect you are doing sure bets. Retail books really hate Arbitrage Betting. Doing sure bets, the punter wins and the bookmaker loses, so it has terrible effect over their income statement at the end of the quarter.
Sooner or later bookmakers find out that you are arbing. However, staying under their radar for as long as possible will prolong the life of your accounts and increase your arbing profit. You can find out how to do that in my article on prolonging the lives of your accounts. Long-term it is important to protect your identity from the bookmakers, as I have explained in my article on this matter.
If you follow those simple rules you should expect your accounts to last long enough in order to secure you a reasonable profit.
The risks involved in Arbitrage Betting
Keep in mind that Betting Arbitrage is not a risk-free strategy: it is a low-risk strategy. If you are dutching long-term you will make some unexpected losses here or there. There are a number of risks involved in this activity. At some point you will probably fall victim to some of them. The risks in question include:
- the books voiding your bet
- the odds moving before having closed the arbitrage
- the offered odds disappearing altogether from one of the bookies before having closed the arbitrage
- miscalculation of stakes leading to exposure to the outcome of the event
- any other sort of “human error”
However, you can learn about those risks and take appropriate measures to control them. This is a great way to boost your profit from Arbitrage Betting. In fact, managing those risks well is the key to making money out of this betting strategy. Read my article on the risks of Arbitrage Betting for an overview of all the issues along the road and what can you do to solve them.
Arbitrage Betting Tools
In order to find arbitrage pairs you do need a supporting software. Of course you can scan multiple bookmaker sites yourself and would perhaps eventually find an arb or too. But doing so manually will cost you so much time, that it really kills the purpose of arbing.
Most people who do arbing on a semi-professional level use an arb detecting software in order to automate this process. It only makes sense, since with an arbitrage software you can find arbitrage bets way more efficiently than if you search them manually. The best arbitrage software tools, which I have used and can recommend, are BetBurger and RebelBetting.
This is mostly the theory behind Arbitrage Betting. I have given some practical tips on finding and placing sure bets in real life in my article on Getting Started with Arbitrage Betting.
To summarize, managing the risks involved in arbing and staying under the radar of the bookies are the two main skills you need to master if you would like to make some money by scalping the betting markets. How to do that is a long topic which I will cover in a series of articles. Just check the ‘Arbitrage Betting’ category on my blog to have a look at them. Or, alternatively, read my free Arbitrage Betting Guide, which contains a summary of the strategy and how to get started. Furthermore, there are some other great sources on Sports Betting Arbitrage around the web, the Punter2Pro guide being one of them. Make sure to follow the blog for more on this topic. In the meantime, feel free to share your questions and comments below.