Arbitrage

Arbitrage is defined as "the simultaneous buying and selling of assets in different markets or in derivative forms, taking advantage of the differing prices."

In simple terms “Buy low, sell high”

Sports Arbitrage

Sports Arbitrage is spotting a difference in odds between sportsbooks and making a guaranteed profit from it.

Normally, if you backed all outcomes of a single sporting event at a single bookmaker you would lose a small percentage of your money.

This is because the bookmaker sets his odds such that he can make a profit no matter what the outcome. In the UK this called overround in USA its called juice.

However, if we take the best competing odds from different bookmakers, it is possible to make a guaranteed profit.

Always remember odds change. An opportunity to make a guaranteed profit can quickly disappear when the bookmaker decides to cut his odds. Always act swifty.

Examples are the easiest way to explain.

Example 1

Consider a tennis event where you can bet £100 on each player at odds of 2.05 at two competing bookmakers.

Altogether you outlay £200 (£100 at each bookmaker), but if either bet wins you receive £100 x 2.05 = £205. With a £200 outlay, that is a £5 profit no matter what which player wins.

Example 2

Bookie1 has odds of 1.10 on Team A and 8.00 on Team B
Bookie2 has odds of 1.20 on Team A and 5.00 on Team B

Here's what you need to bet to win £1000 from the odds offered on this game:

Bookie1
1. £909.10 on 1.10 wins £1000
2. £125.00 on 8.00 wins £1000
Total money bet = £1034.10 wins £1000

Bookie2
1. £833.35 on 1.20 wins £1000
2. £200.00 on 5.00 wins £1000
Total money bet = £1033.35 wins £1000

Looking at those numbers you can clearly see that backing both possible outcomes at Bookie1 will cost you £34.10. Backing both sides at Bookie2 will cost you £33.50. So clearly both Bookies have set their odds well, they will make a profit no matter who wins.

However, if you backed the underdog at Bookie1 (8.00) and the favourite at Bookie2 (1.20) you would be placing only £958.35 in order to win £1,000. That is a guaranteed profit of £41.65.

Because you are using the difference in each bookmakers pricing. No matter who wins, you will win £1,000, and you will have only outlaid £958.35.

Arbitrage trading is as simple as that. In practice, it involves comparing the odds of numerous bookmakers to find the best odds on offer, then seeing if those odds create a profitable return or not. If they do – place the bets and wait for the match to play out to claim your profit.