Arbitrage Betting
What is arbitrage betting?
Arbitrage betting is a relatively new kind of betting that only became possible
with the introduction of sites such as betfair.com that allowed punters to bet
AND lay horses.
In a nutshell the idea is to 'hedge your bets' - in other words BET on a horse
whilst the odds are high, and then LAY the same horse when it's odds are low.
It's a bit like buying and selling stocks and shares - you BUY when the price is
cheap, and SELL when the price is high, and just like stocks and shares if you
buy or sell at the wrong time you run the risk of losing money!
However the difference is that there's a time limit, a cut off point where you
have to hope you've bet the right way - the point at which the race
finishes!
Do it right however and it is possible to get yourself into a position whereby
the actual result of a horse race is irrelevant - you can always win some money,
or at the very least NOT be at risk of losing any money.
Er, What!?
The easiest way to explain it is with an example.
First though, you need to understand the two different types of betting -
'Backing' and 'Laying' - as this method uses both.
Let's pretend it's 9am in the morning and you fancy a horse called 'SureBet' in
the 14:20 at Kelso. When you look on bet fair the current odds are 10/1.
Now whether you think the horse has a chance of winning is irrelevant, the
important point is that you think people will start betting heavily on the horse
- this would result in the price shorteneing over the day.
So, pretend you BACK £10 on the horse at 10/1 Your potential winnings are £100
and your potential loss (or liability) is £10.
Now, later on in the day, as you predcited, money starts coming in for this
horse and by 14:00 the odds are now at 2/1. You can now LAY this horse at
the cheaper price. Lets pretend you LAY £30 at 2/1. Now your
potential Win is £30, but your liability is £60.
However, whether the horse wins or loses, YOU still make a profit!
If the horse WINS you get £100 from your BACK bet, but you are liable £60 for
the LAY bet. Result, you're £40 up (£100 WIN minus your £60 LAY liability)
If the horse loses you lose your £10 stake from the BACK bet, but you gain £30
from your LAY bet. Result, you're £20 up (£30 LAY win minus £10 Back
liability).
Now obviously this is quite an extreme example. It's very rare you would
ever see a shift from 10/1 to 2/1, let alone be able to predict it.
However what many 'arbitrage' betters do is do many small back/lay bets on one
or more horses through the course of the day on very small shifts in price - say
2/1 down to 6/4. This is a much smaller shift and you have to bet bigger
amounts to see a much smaller profit, but if you manage to get on the right side
of the price each time you can gradually build up a bigger and bigger profit.
One useful point about betfair is that it automatically takes into account any
potential wins and losses when deciding how much you can bet.
For example, I recently made a bit of money on this with a Carling Cup
football semi final. My local team, a championship team were playing a
premiership team and were 4-1 down after the 1st leg. The Odds of them
qualifying were 50/1. So I put a £10 bet against them to qualify for the
final.
During the second leg my team managed to pull it back to 4-4, and with only 15
minutes to go all they had to do was not concede and they'd go through to the
final. By this point the odds of that happening were 2/1! Because I
had a potential WIN of £500 betfair actually let me place a LOSE bet of £300
(despite the fact I actually had no money in my account) - it allowed me to do
this because it knew if they did lose I'd win £500 and so would then have enough
to cover the opposite bet.
As it happens I know my team well, and sure enough by the end of the game they
had conceded 2 goals! I now won £300! If they had managed to keep
them at bay and qualify I'd have won £200! And all from a stake of just £10.
Not bad eh?