Definition

In betting terms, arbitrage involves covering all possible outcomes of a specific event to earn a profit, no matter the outcome.

As mentioned previously, an Arb is formed when the odds to lay a bet are lower than the odds to back a bet (after  taking any percentages of commissions into account).*  https://www.bookiesbets.co.uk/

This means that you can back an event to happen at the Bookmakers, and by entering the correct Lay stake at the Exchange, then no matter what happens you will have made a profit. If the event wins at the Bookmakers, you will have won (Bookmaker will have higher odds than the Exchange in the arb) so you will have won the largest amount. You would also have to pay out at the Exchange, because of the Lay which you made (you made a bet that the above event wouldn’t happen) but due to the difference in odds, you will pay out a smaller amount at the Exchange compared to what was won at the Bookmakers.

*There are other ways to form an arb, without using an Exchange to lay a bet. This involves backing an outcome at one Bookmaker, and backing the other outcome at another, and is a lot more complicated then using an Exchange to lay, as there are more outcomes to cover (the draw is normally another possibility).

Though arbing does involve moving large amounts of money into the Exchange to cover the liability, it will not be gaining any interest here so you must be actively arbing or using the liabilty to match-bets to gain the Bookmakers bonuses (as mentioned on the previous page). There will be no point in transferring large amounts of cash from your perfectly good bank account with its %5 interest rate, unless you are actively going after arbs. In which case you will be able to beat any kind of interest rates set by the banks, depending on the amount of time you spend arbing with your funds. Arbing can be an excellent way to multiply your money, but ultimatetely the amount you earn depends on the amount of time you are willing to spend searching for and performing arbs.

An Example:

The odds on Tottenham to win the league are 9 at the Bookmakers. The odds to lay Tottenham to win the league are 8.5 at the Exchange.

You make a £10 bet on Tottenham to win the league at the Bookmakers. From your matcher spreadsheet calculations, you then put down a Lay Stake of £10.65 at the Exchange.

If Tottenham win the league, you will have £90 returned to you at the Bookmakers (odds of 9 x £10 stake = £90). Therefore you have £80 profit here.

You also have to pay out at the Exchange, because Tottenham won the league. You pay out £79.88 (odds of 8.5 x £10.65 stake – %5 commission = £79.88). Therefore you have a loss of £79.88 here.

From the Bookmakers you had £80 profit, minus the £79.88 payout at the Exchange which leaves you with 12p profit.

To round things off, if Tottenham hadn’t won the league, you would have lost your £10 stake at the Bookmakers. You would have won your stake at the Exchange though, of £10.12 (£10.65 minus %5 commission). Therefore you would have made a profit of 12pence at the Bookmakers. As you can see, both values are exactly the same (as both the bets were matched exactly).

The real money is made when you place a stake of more than £10, for example £1000. You would need to lay £1,065.09, but by the end of it you would earn £11.83, just for making two bets. However for this you would need a high Liability – you would need to have a lot of spare cash, incase you needed to pay out at the Exchange (£7,988.17 to be exact).

Another Example:

The odds on Man City to beat Arsenal are 4 at the Bookmakers. The odds to lay Man City to beat Arsenal are 3.5 at the Exchange.

You make a £100 bet on Man City to beat Arsenal at the odds of 4 at the Bookmakers. From your matcher spreadsheet calculations, you then put down a Lay Stake of £115.94 at the Exchange.

If Man City beat Arsenal, you will have £400 returned to you at the Bookmakers (odds of 4 x £100 stake = £400). Therefore you have £300 profit here.

You also have to pay out at the Exchange, because Man City won the match. You pay out £289.86 (odds of 3.5 x £115.94 stake – %5 commission = £289.86). Therefore you have a loss of £289.86 here.

From the Bookmakers you had £300 profit, minus the £289.86 payout at the Exchange which leaves you with £10.14 profit.

Again, if Man City had lost the match you would have lost your £100 stake at the Bookmakers. You would have won your stake at the Exchange though, which was £110.14 (£115.94 minus %5 commission). Lay stake of £110.14 minus the bookies loss of £100 = £10.14 profit. You can see this is exactly the same figure as the outcome above, where Man City won the match.

The value of £100 is quite large to use in a bet, some people may think, but when you are trying to earn money by arbing then the more you put into an arb, the more you will get out of it. The profits are multiplied by the size of the original stake in the matched bet, and although some people may shudder at the thought of placing so much on a bet, its perfectly safe aslong as you go about it the correct way. Read the Danger section below for more warnings…

You can see from the table below that for the above arb (4 and 3.5) the more money you are willing to use in an arb, the more you are going to earn.

Danger:

Of course there are going to be a few points to watch out for when arbing, especially as it involves using a lot of money so you must be extra careful and follow all of the advice given throughout this article. Arbing can be perfectly safe and can be a guaranteed way to get a good return on your money, so don’t be put off by the possible pitfalls – just make sure you are aware of them.

Liability

Obviously when going after arbs one of the main drawbacks is the liability. You will need a lot of spare money incase you win at the bookies, and have to pay out at the Exchange. Because of the way Exchanges works, they won’t allow you to lay an event until you have the money ready in the account (the full amount which you may have to pay out). This is because it prevents people trying to not pay up and cheat the system. When going about arbing, you tend to pile in with a lot of money at the bookies and you then have to lay an even larger amount at the Exchange to equal this.
It may be hard for some people to go straight into the world of arbing unless they have a fair amount of money behind them, that they are able and willing to put in an Exchange.

The Market

An arb is formed from a difference of opinion in the market, and it can be quite a rare occurrence. Usually when one does occur, bundles of people pile in with their money, and the arb soon disappears. This can be extremely dangerous, considering some people tend to back an event at the Bookmakers before laying the event at the Exchange. If you saw an arb and placed a £300 bet at the bookies only to find that all of the available money at the Exchange had been taken, you’ll be stuck. You might have to settle for a lower price at the Exchange, and make a loss on the bet. You could try and cancel the bet at the Bookmaker, but this is very unlikely to happen.

The best way to avoid this sort of scenario is to be quick when spotting an arb, but make sure you are confident with what you are doing. You don’t have the time to make any mistakes, or you’ll lose your money. Probably the best way around losing out on a good price at the Exchange is to take the price you need as soon as you notice the arb. Then you can go to the bookies, and place the bet safe in knowing that the lay has already been made.

Bookmaker Limits

This creates another problem in itself however, this being Bookmakers limitations. As previously mentioned, if someone becomes too ‘successful’ at the bookies and has been winning large amounts after placing large bets for their arbs, it is highly likely they will be limited to the amount they can place on any one bet. This could mean that the amazing arb you notice at one particular bookies is beyond your reach – they wouldn’t take your money for the bet. You must be aware of any limiations set upon you by the bookies if, when matching/laying a bet, you lay at the Exchange first. It would be a disaster if you were to lay a large amount at the bookies before being refused to make the equal bet at the bookies. Of course the way around this could be to make the bet at the Bookmaker first before laying at the Exchange, but this means that the lay price you wanted has been taken up already.

By yanam49

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