Betting Arbitrage

Betting arbitrage, miracle bets, sure bets, sports arbitraging is a particular case of arbitrage arising on betting markets due to bookmakers’ different opinions on either event outcomes or plain errors. By placing one bet per each outcome with different betting companies, the bettor can make a profit. In the bettors' slang an arbitrage is often referred to as an arb; people who use arbitrage are called arbers. A typical arb is around 2 percent, often less; however 4-5 percent are occasionally seen and during some special events they might reach 20 percent. Arbitrage betting involves relatively large sums of money stakes are bigger than in normal betting.

Bookmakers generally disapprove of arbers, and restrict or close the accounts of those who they suspect of engaging in arbitrage betting. Although arbitrage betting has existed since the beginnings of bookmaking, the rise of the Internet, odds-comparison websites and betting exchanges have enabled the practice to be easier to perform. On the other hand, these changes also made it easier for bookmakers to keep their odds in line with the market.

The best way of generating profit, which has been established in Britain via sports arbitrage, consists of 'key men' employing others to place bets on their behalf, so as to avoid detection and increase accessibility to bookmakers. This allows the financiers or key arbers to stay at a computer to keep track of market movement.

While often claimed to be risk-free, this is only true if an arb is successfully completed; in reality, there are several threats to this:

Arbs in online sports markets have a median lifetime of around 15 minutes, after which the difference in odds underpinning them vanishes through betting activity. Without rapid alerting and action, it is possible to fail to make all the legs of the arb before it vanish, thus transforming it from a risk-free arb into a bet. High street bookmakers however, offer their odds days in advance and rarely change them once they have been set. These Arbs can have a lifetime of several hours.

Making errors: In the excitement of the action and due to the high number of bets placed, it is not uncommon to make a mistake like traders on financial markets. For example the appropriate stakes may be incorrectly calculated, or be placed on the wrong legs of the arb, locking in a loss, or there may be inadequate funds in one of the accounts to complete the arb. Those errors might temporarily have an important impact. In the long term, the benefit will depend on the odds. For example one could actually make more money by placing the wrong bet where the outcome happens to be beneficial, though not justified by the arbitrage calculation. However, this stroke of luck being repeated is unlikely, assuming the bookies have calculated the odds so they make a profit.

Bet cancellation: If a bettor places bets so as to make an arbitrage and one bookmaker cancels a bet, the bettor could find himself in a bad position because he is actually betting with all the risks implied. The bettor can repeat the bet that has been cancelled so as minimize the risk, but if he cannot get the same odds he had before he may be forced to take a loss. In some cases the situation arises when there are very high potential payouts by the bookie, perhaps due to an unintentional error made while quoting odds. Many jurisdictions allow bookmakers to cancel bets in the event of such a palpable [obvious] error in the quoted odds This is often loosely defined as an obvious mistake, but whether a palp in fact has been made is often the sole discretion of the bookmaker.

Other problems: Bookmakers who suspect arbing can set very low maximum stake limits, making arbing insufficiently profitable. Capital diffusion is serious; many bookmakers make it very easy to deposit funds and difficult to withdraw them. Making a return involves many bets spread over typically many bookmakers so keeping track is a considerable challenge, and requires excellent record-keeping.

Financial betting refers to the wagering on the price development of a financial instrument at some later date relative to the current price or level of the instrument, against odds offered by a bookmaker. Maximum potential pay-off of the wager is known when the bet is taken and as a corollary risk is known beforehand by being limited to the initial stake.

Financial betting instruments are a type of digital option. The outcome of the wager at settlement is binary, that is, either a win or a loss. Settlement is executed in cash and there is no delivery of the underlying asset. At any point in time prior to the settlement date bets can often be sold, allowing for possibilities to bet on the accuracy of a market move within the fixed limits of zero win loss of the stake and maximum potential win. A fee might sometimes be charged for this service.

The main difference between financial betting and speculation on financial markets using products such as financial spread betting is that the bet must result in a simple binary win or loss based on an event on the underlying financial instruments. This triggers a fixed payout for a win, while with spread betting the payout or loss varies with the price level of the underlying instrument. Within financial floating odds the odds change for a given strike price as the price of the underlying changes. The floating odds company calculates odds for different strikes and how much can be won upon settlement depends on how much is bet at those odds.

Within financial fixed odds betting, the odds are fixed, while the strike price where a win is achieved relative the current level changes. The fixed odds company will calculate how much has to be bet to win a certain amount upon settlement if the conditions of the prediction become true.