Arbitrage betting definition

Arbitrage betting is a method of placing bets on all outcomes simultaneously, to make a guaranteed profit from the difference in odds

Arbitrage betting definition                                 

What is arbitrage betting?

In investment circles, arbitrage is a concept that considers making a profit based on the price difference of an asset. It is executed performing two opposite transactions (buy and sell) at the same time.

Arbitrage betting or “arbing” is used in the betting industry. The basic idea behind the concept is the same as with the trading of financial assets. In trading, it is based on price differences; in the betting industry it is based on the difference in odds.

Arbitrage betting means placing two simultaneous bets or betting on all possible outcomes and making a profit, based on the idea that there is an adequate difference in the odds for each event. Although traders are betting, in theory this is not gambling because the profits are guaranteed. 

In general, the profit made from this type of betting is quoted to be up to 5 per cent of the total stake in all outcomes. Therefore, in reality, making a profit through arbitrage betting would require sufficient cash, because all possible outcomes should be covered. Also, with smaller bets, the profit made will be relatively small. Besides, because betting exchanges are connected, an arbitrage opportunity is quickly eliminated. If it happens before placing a bet on all outcomes, then there is no guarantee for a profit, and traders may lose their money. So, in theory, arbitrage betting looks profitable, but in reality it may result in losses.

Even though arbing seems attractive, bookers and bet exchanges forbid this type of betting. In fact, they close the accounts of traders who use this betting strategy. Before the closure of an account, betting exchanges can limit the maximum amount of a bet placed from a specific account. Also, they can set an upper limit on the maximum profit that can be earned from a betting position, thus limiting the possibility of exploiting arbitrage opportunities.

 

Traders bet on one betting exchange for one outcome, and at the same time, they place a bet on another site on the opposite event occurring. Whichever event happens, they make a profit. 

Arbitrage betting explained

Arbitrage betting opportunities are difficult to find and they can be removed swiftly. Nevertheless, the betting is executed when the odds are not balanced. To make a profit, traders should perform some calculations; luckily, there are arbitrage calculators available online.

Arbitrage betting is often used for betting on sports matches. Before placing a bet, the exact amount should be calculated: the amount will cover the loss made on the other bets and make a profit. When arbing, one event will record a win while other events will record a loss.

For example, the following odds are available on three different betting exchanges for a given football match. They all offer odds for home team win, draw, and away team win. The total budget for betting is $300. The following odds for each outcome on the exchanges are found:

Exchange A: home win – 2.2

Exchange B: draw – 3.9

Exchange C: away win – 5.5

Arbitrage betting would require an adequate portion of the $300 to be placed on each bet.

Exchange A: bet $148 x 2.2 = $325 = profit $25

Exchange B: bet $ 92 x 3.9 = $358 = profit $58

Exchange C: bet $ 60 x 5.5 = $330 = profit $30

The $300 is divided, as stated in the example, and the profit made for each of the events is stated. It is obvious that an adequate amount of money is placed on each event. Regardless of how the match ends, people who placed the bet will make a profit. If the home team wins the other two bets are lost, but the overall profit from this arbitrage betting is $25. The most favourable outcome would if the match is a draw, then the profit is $58. The amount of profit from each event depends on the amount of money at stake. Usually, arbitrage betting calculators are providing the amount of money that should be placed for equal profit to be made on each event.

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image