Posted in: General
Every sports bettor dreams about that perfect wager, the lock that just can’t lose.
But unless you have a copy of Marty McFly’s infamous sports almanac from “Back to the Future,” guaranteed success on a sports bet is impossible – or is it?
Using a method popularly known as sports betting arbitrage, the math whiz crowd has created way to ensure profit on a particular wager.
The term arbitrage is derived from a securities trading trick, in which traders simultaneously buy and sell currencies, commodities, or stock to take advantage of pricing fluctuations in the market. To make a long story short, when a trader can identify slight differences between the price, setting up a simultaneous deal to buy and sell produces a guaranteed profit.
Arbitrage works by capitalizing on the finest of discrepancies, sometimes down to a single penny, so those profits are typically tiny in relation to the investment. Even so, a surefire profit of just a dollar or two definitely beats a loss.
When applied to the world of sports betting, arbitrage works along the same lines.
Basically, with so many sportsbooks out there setting their own odds, savvy bettors shop around for slightly different lines on the same game. When the numbers add up just right, the bettor can place two bets on either side of the contest, locking up a small profit no matter which side wins.
These bets are commonly referred to as “arbs,” “sure bets,” or “miracle bets” within the wagering community.
As you might have suspected by now, arbitrage betting works best on binary wagers – or bets with only two possible outcomes. Sports like hockey and soccer that offer three-way lines (win / lose / draw), or point spread bets that can be pushed with a specific final score, aren’t likely candidates for arbitrage betting.
Of course, you could tinker around in the lab and come up with a three-part arbitrage play, but for the sake clarity, I’ll stick to binary two-way bets throughout this primer.
Check out the table below for an example of arbitrage-based sports betting in action:
In this case, you’ve found a juicy Major League Baseball (MLB) matchup between the Arizona Diamondbacks and the Miami Marlins.
Scanning the betting board over at online sportsbook Bovada shows the D-Backs are a heavy (-276) favorite. Meanwhile, over at the 5Dimes site, the underdog Marlins are getting (+450) to win outright. If you’re accustomed to the European system of decimal odds, the D-Backs are (1.375) favorites against the Marlins at (5.500).
In whatever format, these odds create a perfect opportunity for arbitrage bettors.
By placing an $80 wager on the D-Backs (-276) moneyline, an Arizona win would produce a $110 payout – good for $30 in profit. At the same time, you can bet $20 on the Marlins to notch the (+450) upset, with a win generating a $110 payout and $90 in profit.
With both bets booked, you’re now a surefire winner on this baseball game – so let’s break it down to see why.
When the D-Backs wind up winning, you’re going to collect $30 profit on the wager. When you factor in the $20 lost on the Marlins ticket, your total profit on the game comes to $10.
Conversely, when the Marlins pull out a miracle, you’ll collect $90 in profit for backing the underdog. Subtract the $80 you lost on the Arizona bet, and your total profit comes to $10 once again.
No matter what happens in the game – a blowout or a nail-biter, pitcher’s duel or slugfest – you’ll wind up walking away with $10 in profit on $100 in total wagers.
Earning a 10 percent profit is a tremendous margin for any sports bettor – but doing so without any risk of loss is truly incredible.
That’s the essence of arbitrage betting in a nutshell – gaming the system to guarantee yourself a small profit in the end. But as you’ll learn through the remainder of this page, that’s easier said than done.
Now that you know about the basics of arbitrage betting, we can cover the underlying mathematics in greater detail.
An arbitrage bet takes advantage of the inherent house edge that sportsbooks build into their odds. Essentially, the book only makes a profit when it sets lines that are slightly off the true odds for a particular matchup.
You can use the old coin flipping scenario to get an idea of how this works. If I challenge to you a coin flip bet, in which both of us will win $10 from the other for guessing correctly, neither party holds an edge. The true odds are split down the middle at exactly 50/50, and we’re each receiving an identical payout upon winning the wager. This is also known as a 100 percent market, because there is no additional percentage built in for the sake of profit margin.
But if I offered to pay you $11 for every correct flip, while I only received $10 for guessing right, you’d hold a 10 percent edge on each coin toss.
To determine the margin on this wager, or any other for that matter, you can use the simple formula below:
(1/Decimal Odds onWager A) x 100 + (1/Decimal Odds on Wager B) x 100 = Betting Margin
In this case, with you winning $11 to my $10 on a coin flip, you’re a (-110) favorite against me at even money (+100), using American odds. But we need to convert those into decimal odds, which you can do here using this handy betting odds calculator.
As it turns out, American odds of (-110) equate to (1.91) decimal odds, while even money comes to (2.00). Knowing these figures, we can plug them into the Betting Margin formula to see how big your edge really is:
In other words, you’d hold a 2.35 percent edge over me when getting the (-110) advantage while flipping coins.
At this point, you’re probably wondering what all these edge calculations and betting margins have to with arbitrage betting. And the answer is, only everything at all.
When you know the betting margins padded into lines posted by two different sportsbooks – and those margins correspond in just the right way – you can use arbitrage betting to ensure the edge swings to your side.
Check out the table below to see how that process shakes out:
|Odds* Bookmaker A
|Odds Bookmaker B
*Expressed in American odds, Bookmaker A made Team 1 a (-333) favorite against Team B (+293). Meanwhile, Bookmaker B set Team 1 as a (-248) fave, and Team B as the (+190) dog.
In this case, Bookmaker A set lines to ensure a 102.4 percent betting margin, good for a 2.4 percent edge for the house.
Bookmaker B, on the other hand, went for a little larger margin of 104.9 percent, creating a higher house edge of 4.9 percent.
But when you take the best odds from each book on either side of the game – (1.420) on Team 1 and (3.930) on Team 2 – carefully calibrated wagers create a 95.9 percent betting margin. When the betting margin dips under 100 percent, the difference reflects your own edge as the bettor. Thus, this arbitrage bet provides you with a 4.1 percent edge over the book.
You can use this arbitrage betting calculator to get a better feel for finagling the wager size and ensuring a guaranteed profit.
In this example, a $26.54 wager on the underdog, coupled with a $73.46 bet on the favorite, produces a $4.30 profit on either end. Compared to the $100 total wager, you’d earn a nice 4.3 percent margin on your money.
This is where the issue gets much trickier.
Obviously, any sports bettor worth their salt should take advantage of bookmaking discrepancies to gain an edge. Shopping for the best line is a time-honored tradition amongst bettors, and you’re well within your rights to exploit every edge you can find.
After all, the boys at the book certainly do just that.
Even so, you should think twice about using your primary online sportsbook account for something like arbitrage betting.
First of all, the big bookmaking sites out there have known about arbitrage since long before you or I ever placed out first bet. They know full well that smart bettors can “hack” the system by backing both sides. To combat aspiring arbitrageurs, these sites utilize powerful algorithms to identify suspected cases of betting both sides.
When a major online sportsbook labels you as an arbitrage bettor, they have no trouble restricting your wagering to certain limits, or banning you from the site altogether.
Unless you’re willing to risk your account’s good standing, taking a shot at arbitrage betting probably isn’t worth the trouble.
And speaking of trouble, this system relies on a slew of logistics to work properly. You’ll need a relatively large bankroll to place bets large enough to make the whole enterprise worthwhile. Those margins I referred to earlier tend to by quite small, so you’ll be betting $100 to win just a buck or two for the most part.
Like I said, guaranteed money is always better than a true gamble, but unless you have thousands of dollars to splash around your returns will always be pretty marginal.
Finally, while the example bets used throughout this page were set up to align perfectly for an arbitrage opportunity, a real betting board won’t be so easy.
You’ll be required to scour several sportsbooks in search of mismatches, then run the numbers to calculate your betting margin. When you finally find a prime candidate for an arbitrage wager, the books may have already adjusted their number.
This game requires dexterity and dedication to do it right. You’ll be a part-time actuary, crunching numbers and calculating margins on the fly. If that sounds agreeable to you, by all means give it a go, but most people don’t have the mathematical muscle to make arbitrage betting easy.
Computer-driven algorithms can go a long way towards solving that problem, but once again, you’ll need specialized expertise to set something like that up. If you’re capable of harnessing that type of technology though, I don’t see why arbitrage betting can’t be a viable source of supplementary income for a smart sports bettor.
Arbitrage betting is certainly an intriguing concept, especially for sharp bettors who appreciate the rarity of holding any sort of edge over the books. If you’re comfortable making massive bets to score relatively small margins, while risking intrusion from the sportsbook operator, this could be your ticket to a steady source of income.
With that said, if everybody could win without incurring actual risk, they’d be doing it in droves. As it stands, arbitrage betting is a niche pursuit within the gambling community – and for good reason. It’s difficult, time-consuming, and risky in an unregulated marketplace.
I’ll leave the decision up to my readers of course, but I hope this primer on arbitrage betting puts you in a better position to make that choice.