Arbitrage Betting is betting on all the possible outcomes of an event in an attempt to guarantee a profit regardless of the outcome of the event.
However, it’s not as simple as purely going and betting on all the outcomes as most of the time the sportsbooks margin or vig will result in you the punter, losing a small percentage of your overall investment.
It’s also important when looking into arbitrage betting to carefully consider your staking on each selection. See the two examples below using the best prices offered in Australia from bookies and exchanges on a recent Cricket match between Australia and South Africa.
Poor arbitrage betting staking example
Outcome A – $100 bet on SOUTH AFRICA $1.50
Outcome B – $100 on DRAW @ $7
Outcome C – $100 on AUSTRALIA @ $7
Total investment: $300
Returns vs profit and loss
Outcome A – $150 return for a $150 loss
Outcome B – $700 return for a $400 profit
Outcome C – $700 return for a $400 profit
In the example above, we have ‘level-staked’ all three outcomes which has resulted in two of the selections running for a profit and one outcome, the most likely mathematical outcome running for a loss.
While the punter still has theoretical ‘value’ as the book they’ve built has been at prices that result in a market percentage lower than 100%. It is not an arbitrage bet as their is still a potential loss incurred if South Africa win the match.
See below for an efficient way to stake in such a situation.
Efficient arbitrage betting staking example
Outcome A – $100 bet on SOUTH AFRICA $1.50
Outcome B – $21 on DRAW @ $7
Outcome C – $21 on AUSTRALIA @ $7
Total investment: $142
Returns vs profit and loss
Outcome A – $150 return for a $8 profit
Outcome B – $147 return for a $5 profit
Outcome C -$147 return for a $5 profit
Note that above we have used a whole number for our bets on both the DRAW and AUSTRALIA for ease of calculation.
None the less, it has resulted in all three outcomes running for a profitable result.
So, how did we get to the example above and how can you start taking advantage of arbitrage situations?
RELATED: Betting Fundamentals – Probability and Market Percentage
Arbitrage betting formula
- 1. Arbitrage % = ((1 / decimal odds for outcome A) x 100) + ((1 / decimal odds for outcome B) x 100) …
- 2. Profit = (Investment / Arbitrage %) – Investment. …
- 3. Individual bets = (Investment x Individual Arbitrage %) / Total Arbitrage %
In the first step when determining the arbitrage betting % we are searching for a % that is lower than 100 which indicates an arbitrage situation exists. If the number is higher than 100% there is no mathematical way of betting all outcomes and making a profit from each.
Once you’ve identified an edge, you need to work out the amount you are willing to and able to (considering liquidity) invest, which in turn will determine your profit amount on each outcome.
The final step is identifying the individual bets you need to place to ensure a profit.
Let’s take a look at one more example…
Take an MLB game between the New York Yankees and the Boston Red Sox.
The best odds on both teams are $1.78 on the Yankees and $2.35 on the Red Sox.
Step 1. Let’s determine if an arbitrage % exists and what it is…
Yankees (1/1.78) x 100 = 56.18%
Red Sox (1/2.35) x 100 = 42.55%
Total market % of 98.73 which means THERE IS an arbitrage betting opportunity. We press on!
Step 2. Profit and investment step
Let’s say we are willing to invest $1000 for ease of calculation
($1000/98.73%) – $1000 = $12.86
Step 3. Here we calculate the individual bets that need to be placed
Yankees stake – ($1000 x 56.18%) / 98.73% = $569
Red Sox stake – ($1000 x 42.55%) / 98.73% = $431
Total stake – $569 + $431 = $1000
$569 on Yankees @ $1.78 = $1012.82 for $12.82 profit
$431 on Red Sox @ $2.35 = $1012.85 for $12.85 profit
*profits slightly differ because we limited our decimal places in calculations above to two.
If you’re looking to get involved with arbitrage betting then you’ll certainly need a Betfair account which lets you back and lay selections.
Be warned, as a general rule online corporate Bookmakers HATE arbitrage punters who simply bet when they are the highest odds on a particular outcome and it will put a flag on your account.
So, when possible use betting exchanges and books that happily accept bets from smart players.