Gambling Arbitrage
I hope you liked my latest article on how to get started with Arbitrage Betting. I have recently released my free Arbitrage Guide I found out I still haven’t got through the important Arbitrage Betting risks. As an arber you will need to understand what can go wrong in a sports arbitrage, what are your potential risks and how can you manage the consequences. In this article I present you the three main Arbitrage Betting risks when placing a sure bet and what to do about them.
Arbitrage Betting Risk 1: Line moving/disappearing before closing the arb
Arbitrage is an advanced sports betting strategy that comes from the financial world. This strategy involves multiple wagers on the same game in order to guarantee a profit. An opportunity to arbitrage for a game is more about making money than betting and rooting on a particular team. Arbitrage betting is a sports betting strategy designed to take advantage of pricing discrepancies in the betting markets. It involves placing two (or more) wagers on a single sports event, so that all possible outcomes are covered. In the right situations, these wagers will return an overall profit irrespective of the result of the event.
I start with one of the main Arbitrage Betting risks. You have to remember that like every other market, the sports betting market is dynamic. Meaning that when you find a combination of odds forming an arbitrage you cannot know how long these odds will remain the same. In fact you can be sure they will move at some point. What is more, since the market participants tend to clear market inefficiencies (such as arbitrage) at the moment they arise, you should expect the odds to drift in an unfavorable direction in a very short period of time.
- Arbitrage (or arbing), is the practice of purchasing something (typically an asset or product) and then selling it almost immediately in another market for a higher price. It is often (incorrectly) said that this produces risk free profit. This practice occurs in any market where the same item has the potential to be sold for different prices.
- Arbitrage betting software. As mentioned briefly above, arbers can use software to help them in their quest for opportunities. In short, arbing software sifts through many betting sites, covering all sorts of sports and events, looking for viable arbs.
The good news is that since the betting markets are not as efficient and fast-paced as, say, the financial markets, those opportunities will not disappear immediately. Normally an arbitrage opportunity between a soft and a sharp bookmaker would last a minute or two which gives you enough time to take advantage of it.
However, this is not always the case. It might happen that while you are placing the one leg of the arb, the other one has already drifted. It could be either because you were too slow, or because your arbitrage software is delivering your arbs with a delay, or because the arb was simply too short-lived, in which case there is not much you can do about it.
When this drift happens you will find yourself exposed to the outcome of the event in the bookmaker where you already placed the bet. You won’t be able to turn this bet into an arbitrage anymore since the odds on the other side have dropped. What are you supposed to do?
Solution
First, to prevent this situation from occurring you should always place your bet at the soft book first. The soft bookmakers will mess up the coefficients much more often than the sharps leading to a higher risk of a negative drift there. This is not to say the same cannot happen at the sharp books. You can face the same problem there, but in my experience quite less often. Moreover, the soft books can limit your account at any time without a warning, which does not happen at the sharps and represents additional risk. Therefore, always bet at the soft book first.
And second, once the situation has occurred, the most reasonable thing for you to do will be to cover your exposure, as fast as possible, at the highest odds available at the market. This is sometimes referred within the community as a “negative arb” (which is incorrect since a losing trade cannot be an arbitrage per definition, but anyway). In this way you will incur a sure loss. As bad as it sounds, this sure loss will only be a few percentage points the size of the potential loss you would incur if the game goes the wrong way.
This is an important point. You might be tempted to leave your position open instead of hedging it and see what happens. However, in the arbing circles it is often said that arbing and betting are two fundamentally different activities. As an arber you are not supposed to bet and to expose yourself to any risk regarding the outcome of an event. Betting is not part of the philosophy of arbing and at least at the beginning you should try to avoid it where possible.
Arbitrage Betting Risk 2: Your bet in an arbitrage pair was voided after the event has finished due to a “palpable error”
For most people who have just gotten into Arbitrage Betting and have no background in professional betting this issue comes initially as a surprise. Sometimes when a book messes up the odds (happens at sharp books too, by the way), the offered odds are deemed a “palpable error” by the bookmaker, your bet is cancelled and your winnings taken away.
A bookmaker will normally claim a palpable error when the odds they have offered were “obviously wrong” due to a human error. Now, the definition of “obviously wrong” is obviously unclear, but in general when you see an arb of a very high percentage (say, 10+% whereas the average arb will bring you only 1-2%), chances are high that you have a palpable error.
Solution
That is one of the more unpleasant Arbitrage Betting risks but also an easy one to avoid. Always check whether or not the bookmaker is offering the same odds for another, objectively less likely outcome. For example, you get an arbitrage with an AH+2 bet at 1.95, but you notice AH+1 is offered at 1.95 as well. This makes no sense and is probably a palpable error.
Furthermore, as written above, if the arb percentage is unusually high, the chances are higher that it will be deemed an error. In that case you can decide whether it is worth it to take a risk, bit for a beginner I would just advice to abstain from those at least until you get some feeling for the market.
Unfortunately there is no strict rule as to whether the bookie will claim an error and void the bet or not. Even when you take these precautions it will still sometimes happen that your bet is being voided for no reason. You find it out after the event and there is nothing you can do about it. This is part of the life of every arber and every now and then you will lose some money from this. But don’t stress too much over it, it does not happen that often and especially if you follow the steps outlined above it shouldn’t affect your arbing bank all that much.
Arbitrage Betting Risk 3: Different betting rules; voiding a bet due to cancellation of an event, weather conditions, player injury, etc.
In the rare case (not so rare after you place a couple of thousands of arbs) when an event is rescheduled or cancelled mid-play for whatever reason, often different bookmakers will have different rules regarding whether the bets on the event shall be settled or voided. For example in a tennis match one bookmaker might require the match to come to an end in order to settle bets while other might settle after the game has passed only the first set. This might have the unfortunate effect for you of losing both sides of the arb.
The same situation might occur when the bookmakers simply have different betting rules for certain sport. This is especially common in point betting. For example in basketball point betting for Totals in the fourth quarter, some bookmakers will add up the points of an overtime to the total while others will not. Very often such difference in the rules is the very reason the arbitrage occurred in the first place – in fact it was no arbitrage at all, since you were betting on two different things.
Solution
Some Arbitrage Betting risks will require you to invest some time in order to avoid them. This one is a good example. There is no other solution to this issue aside from learning the rules for the sports you are arbing on in the bookies you are using. This looks like a tedious task (and it is), since you would need to dig through the T&C of every bookmaker and spend a long time looking for the sports you are interested in, assuming you are actually lucky enough to find that information on the bookie’s website.
Fortunately, there is quite some information about that around the web available for free if you only do your research. You can find tables for tennis (1,2,3), basketball, baseball, ice hockey and others. Of course there is the possibility that the information is outdated but for the most part, bookies do not tend to change their rules as it leads to unnecessary confusion.
Sports Betting Arbitrage Opportunities
Summary
So, these were the three most common Arbitrage Betting risks you will encounter while scalping the betting markets. Remember them, learn how to solve them and you will be one step closer to becoming a successful arber.
This article will be included in my free sports arbitrage guide which is already in an advanced stage. I hope I will be able to present it to you in a week or two. Meanwhile, the guys from Trademate Sports have contacted me to write a review of their product. I am currently paper trading with their software to gather a sample long enough to be worth a look. Once I have enough data (here I also suppose I will need a few weeks) I will do the review, so stay tuned to read more about the product. Until then if you have a question or anything to share feel free to drop a comment and good luck with your betting.