How To Make Money From Arbitrage Betting On Sports

Do you want to learn how to make a guaranteed profit from your Sports bets? THIS ARTICLE WILL TEACH YOU WHAT ARBITRAGE BETTING IS AND HOW YOU CAN MAKE MONEY FROM IT.

To be able to utilize Arbitrage (also called arbing) in Betting, any bettor must understand what lies behind the concept of “free money” and be able to spot situations where opportunities present themselves. In addition, it is important to realize that there are certain risks connected with arbitrage betting. People who do arbitrage betting are commonly referred to as arbitrage bettors or arbers.

The strategy surrounding arbitrage betting is built on the foundation of earning money without risking anything and making a guaranteed profit from the trade.

In short, arbitrage betting is about finding odds at different bookmakers, which when combined will lead to a margin that works in the favor of the bettor rather than the bookmaker. When the margin sides with the bettor, a profit is guaranteed. This is if the bettor is able to stake the different bets correctly.

This ultimately means that you need to calculate the margin and stake your bet properly to have the possibility of creating a bet that will give you a profit, independent of the game outcome.

How to calculate Arbitrage winnings in a two-way market, such as in football, where a draw is not a possibility.

How to calculate Arbitrage winnings in a two-way market, such as in football, where a draw is not a possibility.

How do we calculate the margin in a two-way market?

The calculation of the margin and the exploitation of this, is essential to put yourself in a position where it is possible to make money, no matter which way the game and the bet goes. Therefore, it is critical to know what numbers to look for, and how to put them together.

In the examples below, the bet will be on the home-team to win at bookmaker A and the away-team to win at bookmaker B.

The formula for calculating the margin of a two-way-bet (only two different outcomes are possible) is as follows;

(1 / Decimal odds of home-team on bookmaker A) * 100  

+

(1 / Decimal odds of away-team on bookmaker B) * 100

Subtract this number from 100, and the margin will appear. If the number that appears is positive the bettor has the advantage, and if it is negative the bookmaker has the advantage.

How to stake your bet properly in a two-way market?

Finding the margin of the Arbitrage Bet is only half of the job done, as we also need to stake the Bet correctly in order to ensure that the profit will be the same. This will be the case if the home- or away-team wins.

The formula for calculating the correct stake at each bookmaker of a two-way-bet is as follows;

Home-team to win at bookmaker A = (Combined stake between the two bets * Probability of winning according to bookmaker) / Market margin

Away-team to win at bookmaker B = (Combined stake between the two bets * Probability of winning according to the bookmaker) / Market margin 

The approach described with regards to margin and stake for the two-way market applies to sports where there are two possible outcomes. Examples of sports where a draw is not a possibility is tennis, basketball and ice-hockey.

However, there are a number of sports where there are three possible outcomes of a game, with the most popular being football. Therefore, it is a valuable trait to possess the knowledge of how to find the margin and stake bets properly in three-way markets as well.

How do we calculate the margin in a three-way market?

The possible outcomes of a game in a three-way market is a Home-win, a Draw and an Away-win. This means that the bettors must, especially, distribute the stake of the bet to yet another bookmaker. This complicates the calculations a tiny bit, but the premise of the formula still remains the same.

In the examples below, the bet will be on the home-team to win at bookmaker A, a draw at bookmaker B, and on the away-team to win at bookmaker C.

The formula for calculating the margin of a three-way bet is as follows;

(1 / Decimal odds of home-team on bookmaker A) * 100

(1 / Decimal odds of a draw on bookmaker B) * 100

(1 / Decimal odds of an away-team win on bookmaker C) * 100 

Once again, subtract this number from 100, and the margin will appear. If the number that appears is positive the bettor has the advantage, and if it is negative the bookmaker has the advantage.

How to stake your bet properly in a three-way market?

Now that you have found the margin of the bet, it is equally important to stake the bet in a three-way market, as it was in the two-way market.

The formula for calculating the correct stake at each bookmaker of a three-way-bet is as follows;

Home-team to win at bookmaker A = (Combined stake between the three bets * Probability of winning according to the bookmaker) / Market margin

A draw at bookmaker B = (Combined stake between the three bets * Probability of winning according to the bookmaker) / Market margin

Away-team at bookmaker C = Combined stake between the three bets * Probability of winning according to the bookmaker) / Market margin

The three different stakes on the three different bets will ensure the bettor a profit in total, and will reward the bettor with the definition of what Arbitrage Betting is.  

If this was a little confusing, do not worry! Below are more specific examples of how to calculate both margins and stakes in two- and three-way markets.

Example of an Arbitrage Bet in a two-way market

Imagine a tennis match between two of the worlds greatest players, Novak Djokovic and Roger Federer. To be able to use Arbitrage Betting on the match, we need two separate bookmakers, bookmaker A and bookmaker B.

How to calculate Arbitrage Winnings in a tennis-match.

How to calculate Arbitrage Winnings in a tennis-match.

The odds for Djokovic to win at bookmaker A is 1,58.

The odds for Federer to win at bookmaker B is 3,54.

The bettor decides to stake $200 combined.

To begin the analysis of the Arbitrage Bet, it is once again, important to look at the margin of the bet;

Djokovic at bookmaker A = (1 / 1,58) * 100 = 63,29

+

Federer at bookmaker B = (1 / 3,54) * 100 = 28,25

When this is combined, it totals at (63,29 + 28,25) = 91,54.

To find the Margin, we subtract the total from one hundred (100-91,54) = 8,46 %

Now that we have the Margin at hand, it is necessary to calculate what the stakes of the bet should be, and where they should be placed;

Djokovic at bookmaker A = (200 * 63,29) / 91,54 = $138,28

Federer at bookmaker B = (200 * 28,25) / 91,54 = $61,72

Finally, we can see how much the profit will increase and decrease with the different results and scenarios (table below), and understand how the profit in this case is guaranteed.

Arbitrage Betting Article Picture Outcome 2-way.png

From the table above, it is clear that when Djokovic wins, the bettor gains a profit. This is because the stakes and the winning odds outweigh the stakes placed on the opponent.

The same thing happens when Federer wins, even though the stakes lost are higher. This means that the winning odds also must be higher.

It is also clear that the stakes are correct, as the profits match each other almost completely, only missing each other by one cent.

This is fairly easy to understand, but is a little more complex when we add another outcome and another bookmaker to the equation. But once again, do not worry! Just keep reading, and it will all be explained below.

Example of an arbitrage bet in a three-way market

Now that the tennis-match has played out, the attention turns to a soccer-game in the Premier League between Chelsea and Manchester City, where there has been added an outcome. In this match, there is a possibility of drawing the game, meaning that the game can end with a Chelsea-win, a draw and a Manchester City-win.

How to calculate the Arbitrage winnings in a soccer match.

How to calculate the Arbitrage winnings in a soccer match.

We have three bookmakers; bookmaker A, bookmaker B, and bookmaker C.

The odds for Chelsea to win at bookmaker A is 4,80.

The odds for a draw at bookmaker B is 3,40.

The odds for Manchester City at bookmaker C is 2,90.

The bettor decides to stake $300 combined.

To begin, we will try to find the margin of the bet;

Chelsea to win at bookmaker A = (1 / 4,80) * 100 = 20,83

+

A draw at bookmaker B = (1 / 3,40) * 100 = 29,41

+

Manchester City to win at bookmaker C = (1 / 2,90) * 100 = 34,48

When this is combined, it totals at (20,83 + 29,41 + 34,48) = 84,73.

To find the Margin, we subtract the total from one hundred (100-84,73) = 15,27%

Now that the Margin is calculated, we will seek to find the right stake sizes at each individual part of the bet;

Chelsea to win at bookmaker A = (300 * 20,83) / 84,73 = $73,75

A draw at bookmaker B = (300 * 29,41) / 84,73 = $104,13

Manchester City to win at bookmaker C = (300 * 34,48) / 84,73 = $122,08

A table is located below, calculating the different profits and losses from each different outcome of the match. This will showcase how the profit is a guarantee.

Arbitrage Betting Article Picture Outcome 3-way.png

The table shows that the bettor gains the largest win when Chelsea wins, but as this is where the bettor places the most money on the other two options, the profit is no higher than the other profits.

When a draw occurs, the total profit is at a maximum, one cent higher than the second-highest profit.

When Manchester City wins, the table shows the lowest winning numbers, but combined with the lowest stakes on the other options, the profit stays roughly the same as with the other two outcomes.

The regularity in the profits gives a clear indication that the bet is staked correctly, even though the alternative of outcomes- and number of bookmakers grow.  

Hopefully these explanations and examples have helped you understand the calculations behind Arbitrage Betting.

Now it is time to gain a better insight into why these opportunities arise, some risks involved in this type of betting, and lastly some hints and tips to look for in Arbitrage Betting.

Why do these opportunities present themselves?

It is important to understand that these chances do not occur all the time, and might be difficult for the un-trained eye to spot, but comes along once in a while, especially if you know what to look for. If the bettor is guaranteed a profit, that means that the bookmakers are guaranteed to lose money. So why do these professional bookmakers let this happen?

Well, there are a few explanations for it;

- The bookmaker is currently doing a special promotion of a team or a result, leading to opportunities for the observant bettor.

- The bookmakers simply differ in opinion. This is fairly common, as different bookmakers have different systems for picking winners and odds. This might be the most common reason as to why Arbitrage becomes a possibility.

- The Bookmaker makes a mistake, or has a system that does not allow for quick transition of odds. Our odds arrive by the second, and therefore it will be possible to explore these opportunities (?). If a bookmaker swaps the home and away odds, this can be deemed as a palpable error and the bet voided. Which is one of the factors that does not make arbitrage betting 100% risk free. More on this in cancelled bets below.

The guarantee of a profit sound like an enticing opportunity. However, there are certain situations of risk that should be identified and noted, as they could lead to a decrease in profits or creating a situation where the surplus is non-existent.

Different risks and mistakes to look out for in Arbitrage Betting

There are a number of things to look out for when betting in general, but some of the pitfalls out there are a little more specific to Arbitrage Betting than other areas. The most common ones are;

Complicated to understand

- This might be obvious when considering everything stated above in the article, but is nevertheless an important point of emphasis. Make sure to understand the concept of Arbitrage before deciding to explore any of the opportunities that present themselves. It is not enough to spot the opportunities where Arbitrage can be put to practice, the bettor must also have the capability to stake the bets correctly.

- In addition to understanding the calculations of it, the bettor must also have a large number of bookmakers at hand, to be able to find odds that are high enough to cover each other.

- To benefit from Arbitrage Betting, the bettor must invest a lot of time to find the opportunities out there.

Cancelled bets

- Bookmakers have the opportunity to cancel bets where they have made a mistake. If one of the bookmakers in a bet cancels, the bettor has still invested in the other outcomes, and is left exposed in one of the outcomes. This might leave you with a large loss of profits, and set you back of a large sum.

- To prevent this from happening, read the rules of your bookmakers and avoid obvious mistakes. E.g. the bookmaker swapping the home and away odds of Manchester City vs Brighton in the Premier League.

Limitations and Closure of Accounts

- Stake limitations at some bookmakers might prohibit the bettor from staking the bets correctly, which is a big problem, and exposes the premise of Arbitrage Betting.

- Some bookmakers also prohibit Arbitrage Bettors to bet at their sites, as they do not fit their profile, and mostly cost them a lot of money. Remember – if done correctly and without problems, the bettor will always gain a profit.

Time Constraints

- All bookmakers are concerned with updating their odds as frequently as they can manage, and although some are quicker than others, the opportunities present themselves in a tight window, with regards to time. Some opportunities may only last for seconds, as bookmakers often base their odds on other bookmakers.

- As time is a critical factor in Arbitrage Betting, errors will occur as well. This means that Arbitrage Betting might not be as simple in practice as it is in principle.

Bankroll Management

- Generally, a large bankroll is required to have the possibility of Arbitrage Betting, as it is required to have a large number of bookmakers and to have available funds in those accounts at all times, to be able to bet in a market that changes by the second.

Smaller Returns Than Usual

- As Arbitrage Betting guarantees a profit if done correctly, one might expect a very large return for all the hard work. However, it is normal that the avg. return on investment per bet is close to 1% over time. It is necessary for the bettor to understand this. To increase the potential profits, the bettor might increase the total stakes of the bet, although this will increase the risk and losses if something goes wrong (for example one of the above).

Value betting, the superior alternative to arbitrage betting

Before beginning with arbitrage betting you should seriously consider doing value betting instead. There are 3 main reasons for why we prefer value betting over arbitrage betting, and why we built a value betting software instead of an arbitrage betting software.

  1. Value bets yield a higher avg. ROI per bet, the avg. ROI per bet of an arb is 1-2%. The avg. ROI per bet of a Trademate customer doing value betting on the European bookmakers is 2.6%.

  2. Arbitrage bets are not risk free in practice, due to the problems listed above. And in practice you sacrifice ROI to reduce your risk compared to value betting.

  3. Value bets occur more frequently than arbitrage bets —> Higher potential profits

  4. Value bets are harder for the bookmakers to spot —> Increased lifetime at the bookie before you get limitations.

Further resources on Arbitrage Betting, Value Betting and also Matched Betting (a form of arbitrage betting using promotions).

  1. This article explains what a value bet is and how they occur.

  2. This video shows how you can use Trademate Sports to find value bets.

  3. This article explains the difference between a value bet and an arbitrage bet

  4. This article discusses the pros and cons of arbitrage betting vs value betting and matched betting.

  5. This article is written by the experienced Danish arbitrage bettor Vida and why he switched from arbitrage betting to value betting.

6 Tips on Arbitrage Betting

If you do decide that arbitrage betting is the thing for you, we have 6 final tips to read;

  1. Be extremely thorough in your gathering of information, as changes in odds occur every second and will impact your bet, one way- or another. As the profit margins are very tight, this point cannot be stressed enough.

  2. To make sure that the odds are what you remembered them to be it might be wise to double-check all sides of the odds before placing any kind of bets.

  3. As there are a high level of bookmakers and a large amount of money spread throughout different accounts, it is important to have a system that can track your progress. Creating a spreadsheet with all information and numbers is never a bad idea.

  4. Make sure you have understood the concept and calculations of Arbitrage Betting before you begin.

  5. Understand that the returns might not be very high, that it is time-consuming and that it is a complex system.

  6. Read the rules of your bookmakers and do whatever you can to avoid getting limited and having your account closed.