FairPlay - Arbitrage: Risk-Free Betting Guaranteed
You can claim free money – with no financial risk – simply by checking the differences between different bookmakers’ prices.
ARBITRAGE – (French) To buy and sell for profit, taking advantage of varying prices in different markets.
That’s the simple definition of arbitrage. You will take advantage of the differences between markets – in this case, bookmakers’ markets on sporting events – to construct a certain profit for yourself on each and every deal you make, without the chance of incurring a loss.
Your first question might be, “Why would bookmakers, a notably shrewd bunch of gentlemen, present me with the opportunity to remove large amounts of cash from their coffers, without any risk of financial loss to myself?”
It’s worth fully explaining the answer to that question, because you will then be absolutely clear why arbitrage opportunities occur, why the bookmakers can’t stop you taking their cash, and what you should do to benefit from the greatest ‘free offer’ ever made.
Firstly, The Bookmaker’s ‘Theory Of Profit’
When bookmakers offer prices on an event, they do so, naturally, with the objective of making money, and they attempt to make that money by offering you odds which are slightly less than the real chance of the ‘event’ taking place. In our area, the ‘event’ we are talking about is usually a player or team winning a match.
The bookmaker pockets the difference between the ‘real’ price of the player or team winning, and the price that he pays out to his customers, and that difference is his profit.
It works like this... Just suppose we have a tennis match (or snooker, or darts, or anything else that takes your fancy) and the two players are of absolutely equal ability. Neither can be said to have a better chance than the other and, like the spin of a coin, this could go either way.
Then the true chance of both players, just like that coin spin, would be ‘even money’.
So, if the bookmaker priced both players at ‘even money,’ and he took £50 for one player and £50 for the other, the better who picked the winner would be £50 richer. The backer who had chosen the loser would be £50 the poorer and the bookmaker would be, well, he’d be exactly where he started.
The bookmaker would be neither richer nor poorer, he would merely have transferred the cash from the backer of the loser to the backer of the winner, without any profit for himself. Which is not his aim at all. The bookmaker therefore decides that, to make a profit, he needs to take a cut of the money invested. This means, irrespective of which individual backers win and lose, the bookmaker will be in pocket.
He does this by altering the odds he offers his customers. He reduces his prices so that backers receive slightly less than the true odds their selection has of winning.
In the example of our two tennis players of exactly similar abilities, instead of offering ‘even money’ for each, the bookmaker takes a little something for himself and now offers 10/11 for each of them.
When they were even money, you would only have had to stake ten pounds to win another ten pounds – that’s what ‘even money’ means. Now however, since the bookmaker’s odds are 10/11, you would have to stake eleven pounds to win that tenner. You are now receiving slightly worse than the player’s true odds of winning.
But as a Sports Arbitrage Trader, you are looking for bookmaker odds you can use to...
* Win regardless of the result of the event you bet on.
* Never lose. You won’t even break even – you will always profit.
And you need absolutely no knowledge of the events you bet on.
That last point is crucial – you don’t need an ounce of sports knowledge to use this technique. You see, a difference in bookmaker opinion means a CERTAIN profit.
Bookmakers operate in an intensely competitive market and, despite what most people believe, they don’t always agree on the likely outcome of an event. All it takes is a small difference in opinion between the men who set the odds to create a fantastic opportunity for you to profit.
Let’s look at that tennis match again, a real example this time. It’s Wimbledon 2001, the Ladies Singles Match between Lindsay Davenport and Kim Clijsters. The compilers at Victor Chandler saw Davenport at odds of 2/5, and the compilers at Tote saw Clijsters at 3/1.
At 2/5, the total amount to invest in Davenport to return £100 was £71.42. Whereas at 3/1, the total amount to invest in Clijsters to return £100 was £25. That means the total investment required to return £100 – whichever player wins – is just £96.42
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You may scoff at this relatively modest profit. After all, when people win on a bet they usually make at least 15 times that amount! But this isn’t betting. And unlike those people who sometimes get double their money back, you will NEVER lose.
In this case you could have backed BOTH outcomes of the event and, no matter who won, your profit was assured. So, in effect, backing the loser is equally as important as backing the winner.
Now even if you don’t follow tennis and have no interest in gambling, do you see the potential? There was no possible way that you could have lost your investment. This is a small, but beautiful ‘arb’. The bookmakers call this ‘under-round’. You can call it ‘money for nothing’.
Just Make Your Guaranteed Profit, Move on to Your Next Trade and Do it Again!
The arb above is a small example – one that occurs dozens of times each day. Less frequently, around once or twice a fortnight, you’ll come across larger arbs throwing up between 5% and 20%. And once in a while you’ll really hit gold. The point is, the more you look the more opportunities for guaranteed returns you’ll find.
This technique is so incredible because of its simplicity. As a Sports Arbitrage Trader you’ll NEVER suffer a market slump, you’ll NEVER pay Brokers fees, and will NEVER pay tax on your returns.
Arbs which pay around 6 percent are plentiful too. Look at the opportunity presented by this ‘3-ball’ at the British Open Golf Championship, 2001.
A ‘3-ball’ is a bet bookmakers offer frequently. It simply means that backers are asked to identify which of three named golfers will make the best score in the tournament. Prices available included...
Now let’s work out the figures. To return £100 from 11/10 shot Wilson, your investment is £47.61. For Riley, priced 14/5, you need to lay out £26.31. And on Sanders at 4/1, you need to place £20.00.
Your total outlay on these three would have been just £93.92, and your guaranteed return – whoever wins – was £100.
A Guaranteed Profit of £6.08 for Every £100 Invested
So an arb occurs when, using two or more bookmakers, you can construct an ‘under-round’ book, where the total amount of money laid out to secure a £100 return, whichever competitor wins, comes to less than £100. It’s a very simple concept. But the question still nagging you might be, “Why do bookmakers provide us with so many opportunities to pick up this free money?”
Arbs occur because the men responsible for making the bookmakers’ prices, the odds-compilers, have differences of opinion about the merits of the players or teams the bookies are assessing.
You won’t find a group of bigger egos in any one place on the planet than at a meeting of odds compilers. These guys firmly believe that they know more about the particular sports they price up than anyone else, living or dead. For them, it isn’t just a price they’re putting up, it’s their marvellous opinion – and in their opinion, they are totally, unmistakably right.
There was a rather amusing example of this machismo in action at Wimbledon in 2001, when William Hill and Ladbrokes took each other on over the merits of Venus Williams and Justine Henin in the Ladies’ final.
The Hill’s compiler priced the game as 2/9 Williams and 11/4 Henin, whereas the boys at Ladbrokes saw it as 2/5 Williams and 7/4 Henin. These odds produced a small but definite arb.
* Ladbrokes price for Williams of 2/5 required you to invest £71.42 to achieve a return of £100.
* Hills price for Henin, 11/4, required an investment of £26.66.
The total amount required to return £100 was £98.08. Although this was only a small arb, neither the Hills nor the Ladbrokes compiler would back down, and they glared at each other across the High Street for days, while bemused backers helped themselves to as much 2% profit as they wanted. Eventually it took a member of the Board to step in and prevail upon his compiler to change his price.
Are the Bookmakers Mad?!
On the last day of the final Test between England and Pakistan in late 2000, the British bookmaking industry as a whole offered odds of 5-2 that England would win the match. One firm, however, offered 6-1.
You could have simply accepted this value opportunity outright, of course, in the hope that England would come out victorious. But by hedging this one bookmaker’s generous price against what the rest of the industry was offering for a Pakistan win and for the draw, you could have created a guaranteed return on your investment.
In a 2001 season FA Cup game between Bristol City and Kingstonian, there was an easy opportunity available in the spreads for bookings. This market values a referee’s red card at 25 points, and a yellow card at 10, and there are almost always wildly differing views about what the spread should be. This time, Sporting Index [NORM]opened with a quote of 36-40, while IG Index offered 26-30.
What this meant is that one expert odds compiler – who boosts his take-home pay by exploiting his colleagues’ mistakes – bought bookings at 30 with IG, and sold bookings at 36 with Sporting Index. He knew he had a secure profit of 6 units whatever happened in the game, and bet £100 a point for a very tidy profit.
Act Fast If You Want to Cash In
The moment you spot an arb – a gap between the higher ‘buy’ price of one bookmaker and the lower ‘sell’ price at another – you need to act quickly!
As soon as the bookmakers realise investors are cashing in on arbitrage situations, they often move their prices closer together to try to destroy the opportunity. They want to protect their cosy cartel, as well as their own individual profit margins. And to maximize your profits, you must be one of the first investors to recognise the opportunity.
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Three Key Rules for Cashing In from Arbitrage
1. No one is going to tell you that an arbitrage opportunity has arisen. You have to track down these bookmaking errors.
2. Check out all the lesser-known sports played in the US – the hundreds of baseball, football, ice-hockey and basketball matches, not to mention the college games too. They’re big business on the other side of the pond, but US bookmakers consistently fail to protect their industry against arb-hunters.
3. Put darts, snooker and tennis on your list of free-money targets, too. Good prices are now offered by many European and US bookmakers... making your search for arbitrage opportunities that much simpler.