Arbitrage Betting Guide

What is Arbitrage?

Arbitrage betting, or ‘arbing’ for short, which can also be found under ‘sure bets’, ‘miracle bets’ and ‘sure wins’, is a low-risk betting strategy which involves exploiting the mathematical differences in odds offered by different betting opportunities.

The term ‘arbitrage’, originating from French, is borrowed from the market of finance where it is used to refer to the investment strategy of buying and selling assets in different markets to profit from the price difference between the two.

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Price differences are typically small and short- lived, as is also the case in arbitrage betting, but accumulate to significant amounts when multiplied by large volumes.

What is Arbitrage Betting?

Arbitrage betting involves placing bets across a number of different betting sites to cover all possible outcomes of a sporting event, such that a profit is guaranteed regardless of the outcome.

An ‘arb’ arises when multiple bookmakers offer different odds for the same outcomes of an event, either because they take an alternative view on the probabilities of the outcomes, for example, by using different methods to calculate their odds, or due to some error.

Note that it is never to the extent that the favourite to win with one betting company is the underdog at another betting company; the difference in odds is only ever slight. The ‘arb’ is this margin of difference in the odds. A situation where bookies disagree by a significant enough variance would present an arbitrage betting opportunity.

For those not already familiar with arbing, some terminology is explained below:

• A back wager involves placing a bet on the favoured outcome, which is the result with higher odds but a lower return. This may be placed with a fixed-odds sportsbook such as ones found online or offline at retail outlets.
• A lay bet is one placed on the less likely outcome which has lower odds but thus gives a higher return. It is the opposite of the back bet, where one wagers on the most favoured outcome not happening. Such bets can be registered on betting exchanges.

In proper terminology, arbitrage betting relies on backing and laying the same outcome of a sports event with different betting companies.

Why Does Arbitrage Betting Work?

Since this technique relies solely on mathematics, there is no need to be knowledgeable about sports in order to become a successful arber, but it is helpful to be familiar with the probabilistic mechanisms which make it possible.

Bookmakers set their prices to ensure their clients a loss if they bet on every outcome within an event so that arbitrage betting cannot be done within a singular company. This means that backing the favourite to win, the underdog, as well as the draw in a sporting event with the same bookmaker would guarantee a loss. This is because betting companies overround their pricing, to give themselves an edge by tampering with the true statistics of each outcome, replacing it with their own odds.

A fair market would be priced at 100%, which would cover all possible outcomes of a sporting event.

Example:

Consider, for example, a football match between Spain and Germany with the following odds:

Note that summing the likelihoods gives a total of 30% + 60% + 10% = 100%.

In reality, bookmakers do not present a fair market, and overround their odds to go above 100%, giving themselves the advantage by presenting each outcome as ‘more likely’ than it actually is. In order to find a betting opportunity which is favourable for the bettor, one has to seek out odds that add up to less than 100%, presenting an ‘arb’.

Identifying Arbitrage Betting Opportunities

As previously explained, the back bet is normally placed with a bookmaker, while the lay bet is usually made with a betting exchange. However, before betting exchanges, arbitrage bets were made between multiple bookmakers offering varying odds.

Nowadays, these are becoming less prevalent since the majority of betting companies agree on their odds, but although they may be improbable, they are not impossible to come across.

The following example illustrates how an arbitrage betting opportunity may be spotted and how it could be placed between two betting companies A and B.

Consider a tennis match between Rafael Nadal and Kyle Edmund, where there are only two possible outcomes. Since the point scoring system in tennis has inbuilt tiebreaker mechanisms, either one or the other of the two players or teams must win. Consider the following odds being offered by the bookmakers:

Both bookmakers overround. However, they offer disagreeing odds, which presents an opportunity for arbitrage betting. Rafael Nadal is the favourite to win, having better odds which generate less pay out, while Kyle Edmund is viewed as the underdog.

To set up an arbitrage bet, the bookmaker offering lower odds must be chosen to wager with on each outcome. In this case, the back bet, wagering that Rafael Nadal will win must be made at bookmaker B, while the lay bet, wagering that Kyle Edmund will win should be made with bookmaker A, to give the following combined market margin:

Since this value is smaller than a 100%, placing this combination of bets provides the bettor with a guaranteed return.

Placing Arbitrage Bets

After identifying an arbitrage betting opportunity, the next step would be to calculate how the initial stake amount should be divided to guarantee that an equal profit is generated by either outcome. It is critical to use the correct stakes in order to neutralise the risk associated with placing bets and ensure that none of the possible outcomes is more profitable or that no particular outcome will lead to a loss.

Consider the case €100 is available to stake on this bet. Then, the method for calculating how much the back and lay bets should be, would be to use the following formula:

Such that for this example:

• Stake at bookmaker A (Kyle Edmund win) = 100 × 27.00 ÷ 98.43 = €27.43
• Stake at bookmaker B (Rafael Nadal win) = 100 × 71.43 ÷ 98.43 = €72.57

Where €27.43 + €72.57 = €100 is the original stake.

Calculating Profits

To calculate the potential profits achievable in each case, the following formula may be employed:

Where one must keep in mind that two bets were placed, and thus two costs were incurred, equal to the initial stake. In this example:

If Rafael Nadal wins, the back bet with bookmaker B generates the following return: Potential return from bookmaker B = €72.57 × 1.4 = €101.60

Subtracting the initial cost of placing both the winning and the losing bet (€100) gives €1.60 net profit.

On the other hand, if Kyle Edmund wins, the lay bet placed with bookmaker A wins.

The potential return from bookmaker A would then be = €27.43 × 3.7 = €101.49, and subtracting the initial stake (€100), gives a net profit of €1.46.

Arbitrage Betting on Three-Way Markets

In most sporting events, and especially on football betting sites, a draw result is indeed possible. This probability of a third outcome necessitates a slightly different treatment.

Consider, for example, a football match between Manchester City and Arsenal for a three-way arb between three bookmakers, A, B and C, which offer the following odds:

Since the market margin is less than 100%, this presents an arbitrage betting opportunity.

Consider the example with €1500 available to stake. In order to guarantee an equal profit in the case of any of the possible outcomes, the amounts to bet at each bookmaker may be calculated using the stakes formula as in the previous example. In this example:

• Bookmaker A stake on Manchester City win = €1500 × 47.17% ÷ 93.86% = €753.84
• Bookmaker B stake on a draw = €1500 × 28.17% ÷ 93.86% = €450.19
• Bookmaker C stake on an Arsenal win = €1500 × 18.52% ÷ 93.86% = €295.97

The profits in each case can also be computed using the formula introduced previously, so that, once the match results in one of the three outcomes, the attainable profits are as shown below:

In any case, a profit of around €98 would be guaranteed for a €1500 initial stake.

Is Arbitrage Betting Worth the Work?

It is worth noting that in some cases, the staker does not stand to gain much from placing an arbitrage bet, but the small profit is statistically guaranteed. It is up to individual discretion to decide whether this small gain is worth the effort required to find and carry out arbitrage bets correctly.

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However, nowadays, several tools such as online arbitrage betting calculators are available, which will automatically and efficiently perform the necessary calculations to determine the stake required for a profitable bet.

Moreover, in the case of betting on exchanges, a commission may be incurred too, which must be factored into calculations, decreasing the profits. Arbitrage bets typically range from 1% to 10% profit, meaning that for a €1000 stake, as little as €10 and as much as €100 stand to be gained. Profits can potentially be increased by raising the stake or frequency of the bets to accumulate greater profits. However, this is not as straightforward as it may initially appear.

Associated Risks

It is important to clarify that despite the mathematical guarantee of a profitable return, arbitrage betting is not completely risk-free. Although employing this technique is completely legal as there are no laws forbidding it, bookmakers do not take kindly to arbers.

Since betting is a pastime intended to incur its player’s losses and profits to the bookmakers, reversing these roles by ensuring the bettor a profit irrespective of the outcome does not go down well with betting companies.

If a bettor is detected to be using arbitrage betting, it is highly likely that bookmakers will seek to impose sanctions. These might involve the bet being cancelled, leaving the bettor wagered on only one outcome and hence susceptible to significant losses, getting blacklisted and banned from the sportsbook or having your online betting account suspended.

Certain bookmakers, with the intention of encouraging responsible gambling, may close an arber’s account if there are many repeated losses, unaware that net profits may have been made through betting on other outcomes elsewhere.

Moreover, in today’s rapidly changing online betting market, arbs may quickly disappear through betting activity. If not completed fast enough, it is possible to fail to place wagers on some of the outcomes before the arb disappears, making it a conventional bet with all the risks implied. In some cases, if large stakes are introduced, they might need to be manually reviewed by bookmakers before being accepted as a bet, at which time there may be developments in the market where the arbing opportunity vanishes.

When arbitrage bets are placed online a large number of accounts need to be created and managed to place bets with different companies, which makes bettors highly susceptible to hacking and cyber fraud.

Consequences for Arbing

Bookmakers are known to have contrasting reactions to arbing. Some common reactions are:

• Embracing Arbing
  Some bookmakers indeed view arbing positively, recognizing that it sharpens their odds and refines their modeling techniques.
• Penalizing Arbers
  However, the vast majority of bookmakers consider arbers as undesirable clients and impose various penalties, such as:
• Limiting Betting Amounts
  In this scenario, gamblers might find themselves restricted from placing higher wagers or confined to a set minimum amount—often just a few dollars or euros.
• Annulment of Bets
  If arbing is detected, the bookmaker may cancel all current bets, though typically refunding the entire sum in the account.
• Account Termination
  This is the harshest measure that bookmakers can take against arbing. If money remains in the account when blocked, it may be refunded, or the user may be left empty-handed.

The detection of arbers is pivotal for betting companies, as arbing may pose threats to their profits.

How a Bookmaker Detect Arbers

Betting companies are constantly on the lookout for arbers. In the battle against arbing, betting companies adopt various strategies, from acceptance to stringent penalties. Detecting multiple accounts and vigilantly watching for warning signs are critical to keeping arbers at bay.

Arbing might be seen as a clever strategy by some, but to the majority of bookmakers, it’s an unwanted practice that leads to complex detection and prevention mechanisms. The tension between the creativity of arbers and the rigidity of betting companies continues to shape the dynamics of the betting industry.

Tools for Detecting Arbers

• AML/KYC Regulations
  Betting companies usually adhere to local Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, as these standard legal requirements can also assist in identifying and thwarting arbitrage betting.
• Detection Procedures
  Betting companies rely on specific procedures to detect arbers, including:
• Liveness Verification
  This biometry-driven method confirms account ownership and prevents one user from operating multiple accounts.
• AML Screening
  A scrutiny against external databases may occasionally expose a bettor’s participation in financial crimes or other unlawful actions, not limited to arbing.
• Bank Card Verification
  Supplementary security measures include identifying and verifying users by bank card, and restricting them to pre-approved payment methods.

Tips for Safe Arbitrage Betting

Fortunately, there are a number of precautions one can follow to obscure arbing activities, avert suspicion and avoid being profiled and monitored by bookmakers.

• Although arbitrage bets can be made on any sport, they are more detectable when betting on niche or obscure sporting events. It would be advantageous to reserve arbitrage betting for only the most popular gambling sports, such as football matches and horse races, which attract the largest quantities of bets, owing to their global popularity.
• Avoid stakes that are too large since these may attract attention and, therefore, suspicion. Note that little and often may also be flagged as suspicious, yet requires deeper investigation for bookmakers to identify it as arbing. A major sporting event like the football World Cup final or Group/Grade 1 horse race, where the volume of wagers is high, maybe a better place to place a higher bet than usual.
• Place subtle and discreet mug bets, which are deliberate losing bets to appear like a naïve inexperienced bettor, making profiling more confusing.
• Distribute activity over multiple accounts to obscure your activities.
• Sharbing (shop arbitrage betting) involves placing wagers in betting shops. Despite not being as quick and convenient as online sportsbooks, they provide more anonymity and also tend to respond slower to price changes.

Conclusion

Although nowadays, online bookmakers and odds comparison sites can help bettors identify arbitrage opportunities more easily, it also means bookmakers themselves can use such tools to check themselves, allowing them to spot pricing mistakes or identify where their odds may be drastically different than those offered by competitors. Because of this, arbitrage betting opportunities may be very rare.

However, if spotted, an arbitrage betting opportunity presents a win-win situation unless it is detected by bookmakers. If executed correctly, arbing statistically ensures the bettor a profitable return on their stakes regardless of the actual outcome of a sporting event, but one must also be prepared for the consequences of discovery.

Though margins may be limited, the lure of guaranteed profits is very attractive, but it is up to personal discretion to decide whether such returns are worth the careful thought and consideration behind placing these strategic wagers.

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Kate WebbEditor in Chief

With over ten years of experience working with gambling and writing about casinos, Kate brings a lot of knowledge to CasinoTop3.com. Kate oversees all the content written on CasinoTop3.com to ensure it contains factual information with value to you as a player.