An A to Z Brain Friendly And Detailed Explanation Of Arbitrage Betting

Arbitrage betting (also known as a “surebet” or “arb”) is a risk-free opportunity to make a guaranteed profit on a particular sporting event or betting market. When arbing, you are essentially exploiting differences in odds being offered between a number of bookmakers, typically two. The difference in the odds being offered is so pronounced, that you have the opportunity to make a profit no matter what the outcome.

Examples Of Surebets

Let’s take a look at two arbitrage betting examples. Example one, we encounter the following scenario:

Balanced Odds

Andy Murray is playing Novak Djokovic in a Wimbledon Final.

• Murray is available at odds of 2.10 with bookmaker A

• Djokovic is likewise available at odds of 2.10 with bookmaker B

Here we find a perfect arbitrage opportunity. If we simply place £100 on Murray to win and £100 on Djokovic to win, we are guaranteed a profit, in this case a profit of £10.

Let’s say that Djokovic wins. Our returns would be:

• Murray -N10,000
• Djokovic +N11,000
• Profit = N1,000

Unbalanced Odds

The above example was simple. But arbitrage opportunities are not always easy to identify. In the example below, the Chicago Bulls are facing the Cleveland Cavs in a NBA game:

• Cleveland are at odds of 1.20 with bookmaker A

• Chicago are at odds of 8.00 with bookmaker B.

This situation is a bit trickier. How can we calculate an arbitrage bet?

How To Calculate A Surebet

Calculating an arb with an arbitrage betting calculator is easy. But let’s look at the calculations involved to help us develop a deeper understanding of the dynamics involved in an arbitrage betting opportunity.

There are two key questions when it comes to arbitrage betting:

#1 – How do you know if you have identified an arbitrage opportunity?

#2 – How much should you stake in order to secure your guaranteed profit?

Finding An Arbitrage Bet Opportunity

We identify an arbitrage opportunity by adding the implied probabilities of the best betting odds available for each outcome. To calculate the implied probability for each outcome, we simply divide the odds for that outcome in decimal format by 1.

So let’s then look at our simple example of Murray vs Djokovic from earlier in this article.

• Murray at odds of 2.10

implied probability = 1 / 2.10

= 0,476 = 47.6%

So the implied probability of Murray’s odds of 2.10 is 47.6%.

Let’s now consider Djokovic.

• Djokovic at odds of 2.10

implied probability = 1 / 2.10

= 0.476 = 47.6%

To determine if we have identified an arbitrage betting opportunity and a guaranteed profit, we simply add the two implied probabilities together.

Total: 47.6% + 47.6% = 95.2%

When the implied probability for a given betting market adds up to less than 100%, it is an opportunity to make a sure profit. The lower the value below 100%, the more worthwhile the arbitrage bet is and the greater the profit we can make. In this example the market is well below 100%.

So lets then take a look at Cleveland vs Chicago in our NBA example. Have we identified an opportunity to arb?

• Cleveland at odds of 1.20

implied probability = 1 / 1.20

= 0.833 = 83.3%

• Chicago at odds of 8.00

implied probability = 1 / 8.00

= 0.125 = 12.5%

• Market Total

= 83.3% + 12.5% = 95.8%

Again, we have identified the chance to make a sure profit as the market is again well below 100%

How To Calculate Stakes For A Guaranteed Profit

This question was easy to answer in our Murray vs Djokovic example. As both have the same odds, we simply bet the same amount on each outcome to guarantee our profit no matter who wins the match.

But more often than not, arbitrage bets are not this simplistic. Typically we will need to weight our staking according to the odds of each outcome. How do we do this?

#1 – Calculate the implied probabilities of all possible market outcomes

#2 – Calculate the sum of the probabilities of all possible market outcomes

#3 – Divide the implied probability of each individual outcome by the sum of all probabilities

In this way we can determine the correct amount to bet to achieve our profit.

Example: Cleveland vs Chicago

We calculate the implied probability of each outcome and add them together just as we previously did.

• Cleveland at odds of 1.20

implied probability = 1 / 1.20

= 0.833 = 83.3%

• Chicago at odds of 8.00

implied probability = 1 / 8.00

= 0.125 = 12.5%

• Market Total

= 83.3% + 12.5% = 95.8%

Now we calculate how much to bet on each outcome by dividing the implied probability of each outcome by the total market probability.

• Cleveland

= 83.3% / 95.8%

= 86.952%

• Chicago

= 12.5% / 95.8%

= 13.048%

So in this example, if we wanted to arb a total of N10,000, we would place 86.952% of our N10,000 on Cleveland at odds of 1.20 and 13.048% of our N10,000 on Chicago at odds of 8.00. Now we will win the same amount no matter who wins the game, Cleveland or Chicago.

Let’s walk it through:

We want to stake N10,000 in our arbitrage bet.

10,000 * 86.95% = N8695.2 on Cleveland at odds of 1.20

10,000 * 13.05% = N1304.8 on Chicago at odds of 8.00

So now, no matter who wins, we are guaranteed a profit of roughly N440.

• If Cleveland wins, we collect (N8695.2 * 1.20 =) N10434.2. After we deduct our N10,000 stake, we come away with our N434.2 guaranteed profit.
• If Chicago wins, we collect (N1304.8 * 8.00) = N10438.4. After we deduct our N1o,000 stake, we come away with our N438.4 guaranteed profit.

What about other markets like football? To be continue tomorrow

 

Article credit – betting expert archives