Arbitrage betting or value betting?

This is not an article about HOW to do arbitrage betting (sure betting) or value betting. You can read more about what arbitrage betting and value betting is and how they are different in this article. If done right, both ways are betting methods that will quickly multiply your initial investment and these can be a carried out by someone with little or no experience with sports betting. For more information on arbitrage betting (arbing), I suggest an internet search, there are numerous good articles out there. For value betting, I recommend Trademate Sports’ free value betting lessons, which have a solid scientific approach. This article may guide you in case you want to start making money in sports betting, or if you’re already making money but consider changing your strategy from arbitrage to value. This article is about the pros and cons for each of the two strategies based on my personal experiences on the first two years of sport betting. All data presented in this article is real.

Although it sounds nice to multiply your investment, there is no such thing as guaranteed easy money (as far as I know). Being profitable at sports betting requires you to spend many hours with your computer/cell phone/tablet or at the local betting shop. If you already like spending time with video games and watching sports, this may even be appealing to you. There is another thing: due to limited liquidity in the betting markets, you can only invest up to a certain amount. Hence, if you are already a millionaire, it might be unrealistic to believe that your millions will multiply in a short time via sports betting.

ABOUT ME

Until August 2015, I had never before placed a sports bet, so I am no experienced bettor. I started with very small investments, in the hundreds – as things were starting to progress, I began to invest more, but I have never had more than EUR 5.000 invested. Today I have cashed out the initial investment plus another EUR 9.000 in profits. My overall profits have grown steadily, approaching EUR 22.000 and I even had months where I did not bet at all. This may seem like much money to some people, few money to others. It really does not matter, wealth is relative and up to a certain limit, one can choose any size of starting investment. I know that there are arbitrage bettors and value bettors who make much more money, people who have more money and more knowledge. In fact, there are sport bettors who make a living out of it. I am not of this kind and I still have my regular job, but sports betting has provided me with a solid second income and thanks to this, the balance of my family’s overall wealth has grown significantly and I have rewarded us with several extra vacations, instead of just being able to balance income with expenses without luxury.

I did arbitrage the first year, but then I transitioned to value last year. Today I am only value betting for numerous reasons. This does not mean that arbitrage is a worse strategy – in the end, the strategy of choice is probably whichever strategy is a good fit to your personality. Both strategies will give you a positive return in the long term. I will now go into reasons for choosing the right strategy.

THE DATA

First, let us have a look at my betting history, which will be the case study when evaluating both strategies. The overall profit chart provides us with an overview.

Overall Betting Stats

 

  • Turnover / 10: The turnover divided by 10 for illustration purposes.
  • Sum: The overall profit. Sum of Value, Arbitrage, Bonuses, Errors and Expenses.
  • Sum of soft books: If there had been no bets on sharp books, the sum curve would look like this.
  • Value bets: Profits from value betting.
  • Arbitrage bets: Profits from arbitrage betting.
  • Bonuses: Profits from bonuses.
  • Bank balance: The balance of how much that has been invested (negative) or cashed out (positive).
  • Errors: Balance of wins/losses due to wrong arbitrage bets, calculation errors and misplaced value bets.
  • Expenses: Cost of odds arbitrage and value services, transfer fees and commissions.

The overall sum (solid blue line) shows a steady growth of overall profits from sports betting. The three contributors to profit are Arbitrage betting (dotted purple), Value betting (solid purple) and Bonuses (solid green). Errors (dotted red line) and Expenses (solid red line) detract from the profit.

The sum of soft books (dotted blue line) is a hypothetical case to show the potential profit had I not been betting on the sharp books (more on this below).

I have been using 4 sharp books and 18 soft books for the betting. For arbitrage betting, there has been one sharp book and one soft book involved in almost every bet. For value betting, there has been only soft books. A more detailed presentation of this is located in the table below.

 

Distribution of bets at sharp and soft bookmakers

I am not naming which soft books I use, as I would not like it to be possible for any soft book to identify me as the author of this article. Generally, for the case of my betting, soft books are profitable and sharp books are unprofitable as expected. There is an exception with SBObet, generally considered as a sharp book, which has been profitable to me. Maybe this is due to variance, since I have not placed many bets there, only 159. Book5 is a soft book exception. This one has not been profitable even after thousands of bets, but very close to break-even. This soft book is probably not so soft after all, but it is a rather rare case among soft books.

ROI, TURNOVER AND STAKE SIZE

When looking at the overall profit (Sum) in the graphic presentation earlier, it seems that it has been quite steady, resembling a straight line, except from a dip and a rise this year. When looking at the columns for turnover however, it seems evident that there is more wagering during arbitrage, than with value betting. The following schematics confirms this.

ROI at different types of betting

Obviously, there is a high ROI for betting involving getting your bonuses, but these are only initial and not expected to give you continuous profits. Value betting seems to give you much higher ROI than arbitrage betting. The reason is simple: when an arbitrage opportunity occurs, one part has usually not adjusted the odds according to market value. In almost every case, this is the soft book, so during arbing profits at the softs starts to increase while deficits at the sharps start building up. These deficits are the price to pay for having guaranteed profit in every bet. So betting on sharp books in arbing is a sort of insurance to avoid losing money in the short term. In the long term, this becomes very expensive. Today I am simply betting on the soft side of an arbitrage bet. This is my value bet. Had I had the confidence and knowledge to do this right from the beginning I would have had 50 % more profits today, as seen in the graphic presentation earlier (dotted blue line). However, in sports betting variance is huge, so it takes some time to realize that you are pumping money into the sharp books. Look at the Pinnacle balance for instance:

 Pinnacle Results

Pinnacle Results

Relying on the data alone, I would still be in doubt after 1000 bets, whether Pinnacle is profitable when arbing. Ultimately, after a sample size of 1500 bets, I am convinced that Pinnacle is sharp, and I have the feeling that I have spent 5.000 EURO at Pinnacle for the sake of my own comfort, money that I wish that I had not spent. It would be great to be part of the elite that bets on Pinnacle and is profitable in the long term, since Pinnacle does not restrict winners. However, this is does not seem possible with regular value betting and definitely not with arbing.

In summary, arbing comes at a price. You need larger turnover and stakes to compensate for the price of the insurance. The soft books will eventually limit or exclude any person who is profitable in the long term. They may do it based on “inappropriate betting pattern”, “suspicion of arbitrage play” or anything else written in their terms and conditions. These are all just phrases with one common goal: to reduce your possibilities as a profitable bettor, so that you are no longer a threat to their business. I do not blame the soft books, in fact their behavior is quite rational. The betting industry is funded only by people losing while (hopefully) having a good time, so any consistent winners are counterproductive and must be stopped with any means before they grow too big.

From the perspective of the soft books, it makes no difference whether a player is arbing or value betting, both methods bet on favorable/wrong odds and this is unprofitable for the bookmaker. In case of limiting, value betting has an advantage. Larger turnover and larger stakes will get you limited faster. So value betting with smaller stakes, while achieving the same ROI will keep you longer in the game. Once limited, you can continue to value bet, with smaller stakes close to max limit. It is still cost effective, since arbing takes much more time to do. My average stake size for value betting is only a quarter compared to arbitrage for that particular reason, but profits are at least the same. On average, it would take me 2 minutes to do an arb, because I would need to calculate stakes and bet at 2-3 different places, and many confirmation steps. It takes me only 20-30 seconds to do a value bet, because it is one bet and just a short mental calculation of the stake. Value betting can be done anywhere, for instance via the cell phone when waiting for the bus, it is like playing a video game on the cell phone, which most people do anyways. This is not so easy with arbing. If you use a betting service such as Trademate Sports it is really easy to register the bets you placed and keep track of your betting history.

PSYCHOLOGY

The main reason why many people choose to do arbitrage is to avoid the unpleasant feeling of losing money. Arbitrage betting, or “surebetting”, gives you guaranteed profits on each bet regardless of the outcome. Well, this is not the same as completely risk-free, as surebets are quite sensitive to errors. Errors may occur when I accidentally place two bets on the same losing outcome without noticing, or when I cover one side of the bet, but the other bet has vanished in the meantime, when one bet is voided by the bookmaker, etc. Usually, arbing has larger stakes to compensate for the low ROI, so when something goes wrong it has a large impact. This happened to me 5 times in January 2016. Each time I was unlucky to lose money and each time I had the feeling that many hours of betting was lost. It took around 40-50 surebets, several days of work, to make up for one error. Still, for the experienced arbitrage bettor who makes fewer errors, the arbitrage strategy is quite risk-free.

In value betting, one has to accept, that although the overall tendency is upwards, there may be swings up and down, just like an index at the stock market. It is great when things go in your favor, you may get the feeling that you are on the road to become a millionaire next month. When things go bad you may get the opposite feeling, that this activity will eventually bankrupt you and you seriously start doubting whether there is something fundamentally wrong with your strategy. In both cases, emotions (rather than rationality) may have taken over. While emotion may be what motivates and drives people, it may be your enemy when you hit the winning streaks and losing streaks. You have applied a money management strategy, but still these unpleasant emotions may hit you, although you already knew that this is part of the game.

This is what happened to me when I first started betting. I had actually considered both strategies and I decided to value bet. Things were going great, but as soon as I got some downward swings after 50 bets in late August 2015, I felt uncomfortable and decided to begin my betting career doing arbitrage instead.

Early Strategy. Arbitrage betting vs Value betting Results.

This behavior was emotional, because I was abandoning a strategy I had already chosen, which had even given me two-digit ROIs, for a less profitable strategy, which I initially had decided not to do. I was definitely not losing at the time, but the motive was still to remove the uncomfortable feeling of losing a bet.

I later switched back to value betting. Since then, I have punched the pillow and slammed the door during some of my losing streaks, but when looking at the overall profit graph in the first chart (solid blue line) some losing streaks are hardly noticeable, they are very small dips in the overall picture. Some people are naturally adept in being rational, while I am not. The cure for me is exposure, which in return gives me robustness. I have also found out that a method that works for me is to glance at my profit graph every now and then. That is where I realize, that although I just lost wagers during the last four days corresponding to half a month of salary on my regular job, this is just part of the game and the tide will turn eventually. I could also stop following the games, just bet and forget - but on the other hand, I like sports and the games are quite exciting to watch, especially when you have bets on them.

WHAT’S NEXT?

As goes for any other profitable bettor, every soft book will eventually give me ridiculously low limits or exclude me, so I am continuously considering the step of the evolution as a sports bettor. Luckily, some soft books are quite winner friendly and do not shut you down immediately and new companies emerge all the time, so value betting on soft books may continue for some time.

The logical next step will be value betting on Asian bookmakers. These bookmakers have much sharper odds, but do not have a reputation of systematically excluding winners. To my knowledge, there are little to none arbitrage opportunities here, but there are still value bets to be found. The Trademate Sports Pro product find value bets by comparing the Asian odds to the true probability of an outcome. Obviously, with sharper odds, ROI is lower, but a larger bankroll and larger stakes compensate for this.

FINAL REMARKS

When it comes to profitability, value betting is superior to arbitrage betting, since there is no “insurance fee” to the sharp books. If there was no such thing as limits, arbitrage betting could be more profitable, since stake sizes can be larger than with value betting, when there is no such thing as variance to compensate for. However, stake sizes are not scalable towards infinity, limits exist and they will happen to any successful sports bettor, so this makes arbitrage harder to do in a limited environment.

As both strategies are profitable, one then has to consider whether the reduced profits and much accounting on arbitrage is worth it, in order to avoid the unpleasant and inevitable losing streaks. This would be up to each individual to evaluate and experience. The choice of strategy will probably have to do with the sports bettor’s personality.

Written by a guest contributor who calls himself Vida in the Trademate Slack. If you have any questions, you can ask him there.