5 Risks of Arbitrage
The 5 Risks of Sports Betting Arbitrage…
As usual, with any ‘Risk Free Offer’ being advertised on the net (and Sports Arbitrage is most certainly being advertised a lot on the net) there are risks involved… Conceptually, an arbitrage is an exchange where your profit is known beforehand, the transaction is carried out, and you are guaranteed a payout from one bookmaker or the other which will total more than the outlay. However there are always unforeseen variables which can ruin even the best laid plans.
1. Differing Bookmaker Rules
Different bookmakers have different rules for how to handle the outcome in the case of a draw, in the case of a pitcher changing before a baseball game, in the case of extra time in hockey, in the case of an incomplete game of tennis etc. There is a risk one bookmaker will return your money, and the other will act on the bet completely (paying you your winnings, or keeping your money if that bet lost). If there is a difference in rules and one bookmaker acts on the bet while the other simply returns your bet, then you have a 50-50 chance of winning and losing, so it isn’t all bad. But it is a risk nonetheless.
2. Palpable Bookmaker Errors
All bookmakers have a clause in their terms and conditions which basically states that if they make an ‘obvious error’ in their odds, they can cancel the bet at any time. This risk manifests itself particularly in arbitrage bets because we are specifically looking for odds which are higher than usual. If one of the odds we have used in an arbitrage trade was in fact a mistake made by the bookmaker and they decide to invoke this rule, we are obviously left with the second bet standing uncovered. This creates a risk as that remaining bet may lose.
If you place one bet and then take too long to place the second bet, you may be too late to get the correct odds, or you might miss the second bet completely. Missing the second bet leaves you open to potentially losing that bet, but of course, it also leaves you open to potentially winning. Gambling is not the objective of sports betting arbitrage though, so this is a risk.
4. Placing the Wrong Bet
Small accidents can cost a lot of money. Thanks to risk number 3, Dawdling, you are invariably in a rush when placing bets, and hence at a risk of making a stupid mistake. For example, if you are betting on an over/under and at one bookmaker both over and under have the same odds it is not uncommon to accidentally back the wrong option and end up with two bets on the same outcome! Rushing and making mistakes is a potential risk.
Inexperience is probably the biggest risk of all because it manifests itself in all of the above risks either in the creation of the problem, or in the inability to respond to the problem. Not understanding odds, not understanding bet types, not understanding how bookmakers work and not knowing how to react to an unexpected situation means you may lose money. Losing money is precisely what is to be avoided, so inexperience is indeed a risk factor.
…And their 5 Antidotes.
The good news of this page is that every one of the risks listed above has a simple solution to minimize or completely remove the potential loss. The great news is that over the long run, statistically speaking, if you only ever backed one side of every arb you will still come out at a profit. Since arbs specifically use odds which give a greater than 100% return on investment, either one or both bets have odds which are greater than the statistical chance of that outcome winning. If you are indiscriminant in your betting (50-50 selection of favourite or underdog) than your long term return would average out at whatever your average arbitrage percentage was. Statistically, stuffing every arb is still winning. However, we don’t practice this because like all ‘statistically correct’ gambling systems, a long losing streak will wipe our bank balance out and we won’t be able to place the bets which are meant to win and bring us back to into profit.
And so, here are the steps which we need to take in order to avoid the gambling associated risks. More details for each of these steps can be found in the Advanced Guide.
1. Bet Like with Like
Learn what rules each bookmaker uses with any sport you are going to bet on. When you have an arb between two bookmakers, make sure both bookmakers use the same rules and there will be no potential loss.
2. Identify potentially bad odds
Ultimately the call of ‘palpable or human error’ is up to the bookmaker, and there is nothing gamblers, or arbers, can do to change that. However, we can follow a few simple rules for identifying odds which might be errors. Any arb which is 5% or over should arouse an instant suspicion and cause you to look very closely at the odds involved.
The most common form of error is reversed odds, where the odds or handicapping of the favourite and underdog have been swapped. Check for this. Are the odds for either of the bookmakers more than 25% higher than odds offered by other books on the same event? It is likely an error if they are. Lastly, do the two books agree on whether the favourite is obvious or not? An obvious favourite/underdog is indicated by odds under 1.85 and over 2.25 respectively. If one book offers odds of 1.90 and the other odds of 2.50, then one book is saying that the game is close (1.90), while the other is saying that the outcome is obvious (2.50 will ‘clearly’ lose). Only trust arbs where both sets of odds are within the 1.85 and 2.25 range, or both odds are outside of the 1.85 and 2.25 range.
That being said, be wary of odds that are identical… 2.20 vs 2.20. It is likely that one bookmaker in that instance has reversed their odds. That is, they have most likely accidentally given the home team the away teams odds and vice versa.
3. Take it slow
4. Paper Trade
5. Trade with small bets
These 3 antidotes are all part and parcel of the same solution to the last three risks. In order to move fast, you have to take it slow in the beginning and learn how to do it properly. In the beginning, you need to start ‘trading’ without actually betting real money. Find the arbs, go through the motions, pretend you are doing it but don’t actually bet anything. This is called ‘Paper trading’. This allows you to learn how the bookmakers work without risking your money, it builds experience (Risk #5). As you gain some experience you will navigate to the correct destination faster (Risk #3) and place the correct bet more reliably (Risk #4). With the basics under control you will need to progress past paper trading to real money in order to understand how the bet confirmation process takes place, and so trading with very small amounts is a necessary second step.
Part of “Take It Slow” should be carried all the way through your arbing career. In the opening months you should triple check everything.
- Triple check the arb isn’t an obvious error (as described above).
- Triple check the odds you have are for the correct bets (1×2? +0.5?
-0.5? +0.25? over or under? Half time or full time?).
- Triple check when the game will be played. Will you be seeing your profits
- Triple check you have the right game in the right league with the right
- Triple check that the odds at the bookmaker are the odds reported by
your alert service.
- If they aren’t, triple check any re-calculations you make if it is still an arb.
- Triple check your bets. Have you placed the right amount in order to
maximise the arb?
If, after all of that checking everything is still in order, then you very quickly take one reliable bookmaker to the final confirmation page. Go to the second bookmaker and submit that bet. Wait the 2 second to make sure that bet has been accepted. As soon as it has been accepted submit the bet at the first bookmaker.
Easy isn’t it?
OK, so Arbitrage may seem difficult in the beginning, and the truth is it has a steep learning curve. But any legitimate opportunity to work at home and make a good profit at the same will always involve real work. Once you master the few basic principles and continually apply the above triple check steps, you will very quickly improve the rate at which you can place an arb. Your mind will be triple checking everything as you go, and you will flow through the whole process without needing to think about it. But in the beginning… you have to take it slow!
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