Arbitrage is simultaneously depicted as the holy grail of sports betting and a demanding, rigid financial tool. The truth, however, is much more interesting.
Arbitrage betting is the practise of exploiting price differences between opposing outcomes on the same event, in order to land a guaranteed profit. Usually the target profit margin when placing these bets is around 2-3%, so players will need large pots in order to land big wins.
Arbitrage differs from hedging in that bets are only placed when you will earn money no matter what the outcome is, whereas hedging is more commonly used to minimise or protect against potential losses.
An arbitrage bet is generally referred to as an 'arb', and those who place it are 'arbers'.
One method of arbitrage betting is to look at the odds of events in the hope of spotting discrepancies between bookies' prices, or finding useful special offers/money back triggers.
The hardest part of arbitrage is identifying potential opportunities. Generally, this betting strategy looks for the games that systems favouring underpriced underdogs or clear mismatches would instantly write off. Tight games are the life blood of the arber.
In football betting, the Champions League match between Real Madrid and Bayern Munich on the 23rd of April is a good example. Betfair Sports had pre-match odds of 6/4 on Real, 19/10 on Bayern and 13/5 on a draw. Arbers would look for the highest odds on each outcome at every bookie in order to place bets that can't lose. Alternatively, on the Betfair Exchange, players can opt to back or lay events at certain prices and wait to see if their odds are matched.
Football betting is tough for this kind of strategy, however, since there are three outcomes and betting volumes are high. A more fertile ground is in-play snooker betting.
For example, Neil Robertson's match against underdog Li Yan in the 2014 China Open Qualifying saw several chances for successful arbs in the frame betting, because neither player makes frequent match-winning breaks. So backing each player to win the frame when they weren't at the table yielded sufficiently high odds to guarantee profit.
The key is comparing as many odds as possible, or playing markets with quick price changes, to capitalise on the shifts.
What many gamblers don't realise is how flexible arbitrage is. Comparing odds for value discrepancies isn't just about speculatively comparing prices and deals, it's about being creative with the markets.
A simple example from football betting is mixing match goals and clean sheet market. If you back the home team to score more than 0.5 goals, and the away team to keep a clean sheet, both at odds in excess of evens, you're guaranteed a profit.
But the number of markets that can be mixed and matched in order to make that profit is potentially huge, and will vary from sport to sport. It's even possible (though slightly more risky) to mix pre-match and in-play bets in order to track price changes.
Examine the markets available at Betfair Sports to see which represent similar outcomes, and how prices can be compared for value, in order to start developing your own arbitrage strategy.
As the 2014 FIFA World Cup progresses, opportunities abound in the fluctuating prices of football betting markets. Find out how to make small, regular gains by engaging in arbitrage - comparing prices and capitalising on changes as the tournament develops.
Lay betting is the process by which punters are given the opportunity to bet against a certain outcome.