The introduction of betting exchanges has given rise to the potential for sports bettors to guarantee a profit from a sports event by exploiting arbitrage situations. Sports arbitrage betting works on the same principle as buying and selling commodities in the financial markets. In both cases there is only a small window of opportunity.
Betfair and other exchanges are similar to the financial markets. One of the common areas is the concept of the arbitrage. In sports betting traders who seek out arbitrage opportunities are known as arbers and the practice is called arbing. In economic theory arbitrage is defined as profiting from price imbalances in two or more markets. In order to take advantage of an arbitrage scenario deals must be done at the same time that exploit the imbalance.
There is a subtle difference between arbing and trading. Arb transactions are carried out at the same time and in different markets. Trading to guarantee a profit involves placing bets at different times but at advantageous odds. An arber will only get involved when there is negligible risk but a trader is at the behest of price movements.
Most sports bettors gamble for enjoyment and know they will lose and win some bets. However, arbers may not have any sporting knowledge or interest in the sport they bet on. A Sporting event is merely the arena in which they can back and lay at the same time to exploit short term price imbalances.
In sports betting arbing is a situation whereby you have no-risk as a result of placing a back bet at high odds while laying the bet at lower odds with a different bookmaker or in the exchange. Conversely a successful arb can also mean laying a bet at a low price and then backing the same outcome at a bigger price. The principle is buying low and selling high or vice versa. This might be based on the number of runs in a cricket match or total goals in football but the actual sporting event is irrelevant because the principles across any sport are the same.
Arbitrage is suited to the sports betting professionals who focus solely on making profits. They are not in it for fun, excitement or adrenaline surges. Even though these make be experienced they are not the primary motivation of a professional arber. The pro caries out research and applies discipline to the art of arbing and has a positive expectancy due to the mathematics and nature of arbitrage opportunities. If he can’t win he won’t trade and will wait for other arbitrage openings.
Sports betting arbing meets one of the objectives and motivations of a dedicated sports betting professional and that is to generate an income and make betting a full time job. There is a need for patience and then quick action because arb openings are not that common. Once they appear the market will quickly right itself and close the window to exploit the situation.
For many years UK sports betting in general and horse racing in particular was just about backing an event to happen and specifically a horse to win a race or finish in the each way places. Spread betting emerged in the 1980’s as traders in the City of London sought out different ways of plying their trade. Spread betting companies introduced the concept of buying and selling in a sports market and Betfair applied the principles to backing and laying.
When Betfair arrived in 2000 sports bettors could operate on both sides of the market. That meant that arbing was possible in sports betting and it mirrored the activity in the financial markets. Customers with Betfair and a traditional bookmaker can back an outcome at a price and lay the same outcome at a lower price with a betting exchange. Bookmakers in different countries may price discriminate but there are no boundaries with the internet and bettors in other locations can profit.
Market forces will also determine price discrepancies. A bookmaker may be looking to balance the book for an event by pushing out the odds for one outcome. A lower price might be available with an exchange operator so there is a window of opportunity to benefit from an arbitrage situation. Trading will soon eliminate the imbalance and the arb opening is closed. Patriotic support for an international football team could create odds that differ from the global scenario and arbers will take advantage and the opening will soon disappear.
Arbing opportunities between a betting exchange like Betfair and a traditional fixed odds bookmaker are the most common but shrewd operators may find openings in different markets on Betfair. Again, these imbalances are only brief as there are many arbers out there who see arbing as an opportunity to make an income without much effort. Bets will be placed in the markets at the arb price but very quickly these won’t be matched and there will be a price adjustment to eliminate the arb.
On Betfair there are slightly different markets for essentially the same things. For example placing a back bet for a football match to have three goals or more is the same as betting on over 2.5 goals. On occasions you can take advantage of arbing opportunities between two markets for the same occurrence and outcome. These openings are rare but they cam provide a way of placing risk free bets with a betting exchange.
The price imbalances might be marginal so the guaranteed percentage profit is minimal and exchange commission may negate all the benefits. It won’t take long for the market to balance itself so timing and speed is crucial. Two bets have to be placed at the same time in volatile markets and the arb could close in the time between placing the first bet and the counter bet. Fast internet connection is essential.
Here is an example of an arbitrage between a fixed odds bookmaker and Betfair:
In a football match that brought together Liverpool and Manchester United with Liverpool the home team the 1X2 betting in traditional odds format would be as follows:
The Betfair odds could be as follows:
A £100 bet on Manchester United at 2/1 would return £300 which means a profit of £200. A £100 lay on Manchester United at 2.90 would equate to a loss of £190. If Manchester won the net profit would be £10 and if they did not the £100 back bet would be negated by the £100 lay bet. The two possible outcomes are a £10 profit or a won of £100 and loss of £100. At these odds it is possible not to lose and there could be a profit.
Now here is an example of an arb between different Betfair markets:
Betfair allows customers to back three goals or more or over 2.5 goals which are exactly the same so you can take advantage of an arb opportunity between these two markets as follows:
At the relative odds in the two markets a profitable bet is guaranteed. In both examples timing is key because the odds will quickly adjust to eliminate the imbalance and potential arb.
Initially there were regular opportunities to take advantage of arb openings. However, information is open in the sports betting markets and these good things were soon in the general betting public domain. Many traders and recreational bettors are arbing now and they are becoming more sophisticated. Bots can now automate the process as they read the betting markets and bet accordingly when an opportunity arises.
Another area to examine is the betting rules with fixed odds bookmakers and a betting exchange. Conflicting payout terms can negate the opening for an arb so it is important to understand the rules of any market before getting involved. Tennis and golf markets in particular are subject to differences in the way bets are settled.
More wise gamblers looking for arbing opportunities and using greater sophistication means finding arbs for regular bettors is much more challenging. However, the arbs still exist but bettors must be quicker to profit and that means the fastest equipment and internet connection. Arbing is low-risk betting and not no-risk betting due to the time element. The market can move in the time between the bets being placed which creates an unwanted scenario so speed is of the essence.