What is Sports Arbitrage Betting?

You may be wondering how the concepts of arbitrage apply to the world of gambling.

Similar to the examples above, people who take advantage of arbitrage betting are exploiting price differences in multiple markets for the same item.

In this case, various bookmakers (the markets) are setting the odds (the prices) for outcomes of various sporting events (the items).

In an ideal, hypothetical world, the bookmakers would be able to perfectly calculate the probability of the outcome of all sporting events and set their odds accordingly. However, we live in an imperfect world where these probabilities are calculated differently by different bookmakers.

If Bookmaker A has a different opinion to Bookmaker B on the winner of the UEFA Champions League, it may be possible to bet on Outcome C at Bookmaker A and Outcome D at Bookmaker B and make a profit regardless of the outcome!

This is the essence of sports arbitrage betting.

Arbitrage betting opportunities can also arise when some bookmakers are faster than others at reacting to news which may impact the outcome of a sporting event.

If news is released of Real Madrid's star striker spraining their ankle in training and Bookmaker X takes 15 minutes to update their odds on the upcoming match, while Bookmaker Y updates within 2 minutes, there will be a 13 minute window where an arbitrage opportunity exists!

Still not clear? Let's dig into a few examples!

Arbitrage Betting Examples

For those that are unfamiliar with how betting odds work, odds of 2.00 indicate that if your bet is successful, you will receive 2.00 times that amount of money that you originally wagered on the bet. For example, if you wagered (staked) $100 on the outcome and were successful, you will receive $200 (your $100 stake plus $100 in winnings).

For an event where there are only two outcomes (win or loss), odds of 2.00 on each of the outcomes mean that there is an even (50%) chance of both outcomes occurring.

However, in reality, a bookmaker needs to have an edge to make money (they are a business after all!) so even if they thought that there was an even chance of both outcomes, they would set the odds to something like 1.90 for both outcomes.

If 2 punters decided to bet $100 on the 2 different outcomes, the bookmaker would receive $200 in staked bets, but only pay out $190 to the punter which won. They would profit the $10 difference. This is a 5% profit margin for the bookie ($10/$200 = 5%).

Considering that the bookmaker will always have a profit margin built into their odds, arbitrage opportunities are not possible by betting on all outcomes with a single bookmaker. The arbitrage opportunity exists between different bookmakers.

Tennis matches are a great example, as there are only two outcomes (Player 1 wins or Player 2 wins). It is not possible for a match to end in a draw.

Say that Roger Federer and Rafael Nadal were matched up in the final of the French Open. Nadal has a strong record on the clay so he is a hot favourite. However, different bookmakers have different opinions on just how much of a favourite he really is.

Each of the bookmakers have individually priced in a profit margin to their odds.

However, if we take the highest odds available for Nadal (1.29 @ Pinnacle) and the highest odds for Federer (4.70 @ Bet365) and bet on each of them with a very particular wager, it is possible to profit regardless of who wins.