An arbitrage bet is made by placing a bet on all of the possible outcomes of a sporting event at certain odds that will allow you to make a profit no matter what the outcome of the event is. In the sports betting world, someone who participated in arbitrage betting is known as an “arber”.
As you might imagine, it is tough to find a single sportsbook that offers odds on each side of a sporting event that are so unbalanced they will allow you to successfully pull off a profitable arbitrage bet. Therefore, you will usually need to find two different sportsbooks in order to attempt an arbitrage bet and the odds must be exactly right. A large difference in opinion on the outcome of an event is the reason for the profitable gap in the odds that are offered between multiple bookmakers.
Arbitrage bets are complicated activities that require some good mathematics skills as well as some effective research skills. Throughout this article, we will explore topics such as why arbitrage betting is so difficult, how you could possibly accomplish such a feat, how much profit you can expect to make, and whether making arbitrage bets is a viable strategy over a long period of time.
The Math Behind Arbitrage Betting
Even though there are currently arbitrage calculators available online which will track up-to-date odds for you and tell you exactly what you need to bet on each selection in order to guarantee a profit, it is important to understand the math that is being done on a fundamental level. However, these calculations can take some time at first and odds can change quickly so if you plan on making your own calculations you better practice a lot and get very good at doing it before attempting a real arbitrage bet.
Let’s assume that we want to look for an arbitrage opportunity in a tennis match between Djokovic and Nadal. Through our research, we find that one sportsbook (Sportsbook A) has Djokovic listed as a 4/3 favorite and Nadal as a 7/2 underdog and that a second sportsbook (Sportsbook B) has Djokovic listed as a 3/2 favorite and Nadal as a 5/1 underdog.
The main idea of arbitrage betting is to find a situation where the inverse of the total odds of both possible outcomes adds up to less than 1. This will guarantee you to make a small profit no matter what the outcome of the sporting event is since the odds for each outcome with pay more than your total wager. In order to find the inverse of each number you simply flip the fractions on the odds given above and then divide the numerator by the denominator.
For example, flipping the fraction on Djokovic’s 4/3 odds to win from Sportsbook A will give you ¾ and when you divide the numerator (3) by the denominator (4) you end up with an inverse of 0.75. In order to find a profitable arbitrage opportunity, you must now find a sportsbook which offers odds on Nadal that has an inverse of less than 0.25. It just so happens that Sportsbook B in our example above offers 5/1 odds on Nadal which gives you 1/5 when flipped and 0.20 when divided through.
Therefore, since the sum of the two inverse numbers for both of these bets is equal to 0.75+0.20 or 0.95, then making a bet on Djokovic at Sportsbook A and a bet on Nadal at Sportsbook B will provide you with a return on investment of around 5% no matter who wins. You can easily calculate your expected return on investment by simply subtracting the sum of the inverse odds from the number 1.
Now that you know for sure that this tennis match is a profitable arbitrage opportunity at the current odds being offered by these two sportsbooks, the only thing left to do now is to decide how much you should bet on each selection to ensure your maximum profit. For the sake of simplicity, we will assume you wish to bet $10,000 on Djokovic with Sportsbook A and now you must calculate how much to bet on Nadal at Sportsbook B.
The very simple equation that you can use in this situation is to make your second bet equal to the first bet multiplied by the odds of the first bet and then divide that total by the odds of the second bet. This means that in our example above we would need to wager 10,000 x (1.333/5) or a total of $2,666.67 on Nadal at Sportsbook B in addition to the $10,000 bet on Djokovic at Sportsbook A to create the perfect arbitrage bet with maximum profit.
How Can You Successfully Complete An Arbitrage Bet?
One of the main problems that gamblers run into when trying to execute an arbitrage bet is not having a large amount of capital to spend. Considering the fact that the return percentage on an arbitrage bet is so small and the profit is nearly guaranteed once you complete the bet, it makes sense to wager as much money as possible. If you don’t have a reasonable bankroll to work with then the amount of time and money you have to invest to see such a small return is probably not going to be worth it.
Arbers may also need to invest some money into specialized arbitraging software to ensure they can track the odds changes at different sportsbooks as quickly as possible. The average window of time that an arbitrage bet remains possible is around 15 minutes, which is not much time at all so arbers must act as quickly and precisely as possible.
Considering you may have to travel to multiple sportsbooks if your bets are not being made online, many arbers will simply hire people to go make their wagers for them in multiple locations at once. This ensures that the arbitrage operation is more time-efficient and has a better chance of being booked before the odds change.
Why Are Arbitrage Bets So Difficult To Execute?
One big reason why successfully completing arbitrage bets is so difficult is that even though they are perfectly legal the sportsbooks frown upon those who try to make them. If a sportsbook suspects that you are arbitrage betting they might refuse to pay your winnings which could be devastating since some arbitrage bets are for very large amounts of money. These books may also refuse any future bets from you which could put a damper on how many arbitrage opportunities arise in the future.
Another explanation for the difficulty level of an arbitrage bet is that it requires the bettor to have a ton of time on their hands as well as a good amount of experience, money, and discipline. This combination is quite rare and it takes a lot of work and dedication to reach that point.
Arbitrage betting on the internet comes with its own unique challenges even though it saves you the trouble of hurrying from one brick-and-mortar casino to another. One of the main challenges presented by online arbitrage betting is that banks and e-wallets like to freeze or flag accounts that move large amounts of money around on a frequent basis. In addition, funding multiple online sportsbook accounts with a ton of money in each one is going to put a limit to your cash liquidity since these sites usually take a few days to process withdrawals.
Sportsbooks aren’t always to blame for failed attempts at arbitrage betting since human error also plays a big part in bets that have failed. One of the most common mistakes that novice arbers make is miscalculating the odds to makes it seem like a profitable arbitrage situation when in reality it is not. They could also miscalculate the stakes that they should be betting on each side which can easily throw the profitability of the whole operation out the window. In addition, the silliest of human errors could occur such as traveling to the wrong casino by accident, handing the cashier the wrong amount of cash, or forgetting to check if the odds have changed before you place your bets.
Long-Term Viability of Arbitrage Betting
It is quite difficult to make a long-term career out of arbitrage betting for a variety of reasons even though it is perfectly legal. Although there are profitable arbitrage opportunities arising every single day, it takes a considerable amount of time, money, and energy to identify and execute them successfully.
Even if you are one of the few humans on the planet who has what it takes to do arbitrage betting in the long-term you can still run into annoying problems such as having your account closed or being banned from a sportsbook. A ban is terrible for the long-term prospect of being an arbitrage bettor since you will inevitably miss out on some perfect chances to make an arbitrage bet at one of those sites or locations you were banned from.
Another reason why it is so hard to complete arbitrage bets with repeated success in the long run is that books will often track players who are depositing large amounts and betting it all at once. This is a very tough spot to be in because if you don’t bet big each time, your returns will be minuscule due to the 2-4% average return on investment of an arbitrage bet and if you do bet big you risk the sportsbooks catching on and limiting you in the future.
Finally, with companies like Iovation creating software that helps online sportsbooks identify players who are constantly making possible arbitrage bets, the future of the professional arber is looking grim. Technology will only get more and more advanced when it comes to prevention of arbitrage betting and competing with these changes over a long period of time will be very difficult for most people.