Arbitrage Betting

In this piece, we will discuss how arbitrage betting works by walking through the mechanics and explaining how to identify arbitrage opportunities. We’ll also assess the benefits, challenges, and legal/ethical considerations of arbitrage wagers and offer advice for successfully using the strategy.

What is Arbitrage Betting?

Arbitrage betting is a gambling strategy that allows bettors to exploit discrepancies in odds across different bookmakers to effectively guarantee a profit. It is very similar in manner to Dutch betting, though the latter involves using a single sportsbook while arbitrage uses multiple.

For example, imagine a tennis match between Player A and Player B. One sportsbook offers odds of +110 on Player A to win, while another sportsbook offers odds of +110 on Player B to win. If you bet $100 on each player at these odds, you would invest a total of $200. Regardless of who wins, you would receive $210 from the winning bet, securing a guaranteed $10 profit no matter the outcome.

Understanding the Mechanics of Arbitrage Betting

According to researchers at the University of Zurich, the overwhelming majority of arbitrage opportunities return less than 1.2%. This is because the differences in bookmaker odds tend to be small, and when a large odds discrepancy is present, it is typically corrected within a few minutes.

Bookmakers tend to keep their odds close to those of their competitors to prevent potential arbitrage scenarios.

Let’s take a look at a hypothetical scenario where arbitrage betting would not only be possible but would be 100% profitable. Note that such a difference in the odds has been dramatized for the sake of example.

In a game between the Boston Celtics and Los Angeles Lakers, Sportsbook A has moneyline odds of “Celtics +110, Lakers -130” while Sportsbook B has odds of “Celtics -130, Lakers +110.” Betting the same dollar amount on the Celtics at Sportsbook A and the Lakers at Sportsbook B guarantees a profit regardless of the outcome.

A $100 wager on each team would result in a $10 net profit across the two wagers. This is because the payout from a winning wager would offset the costs of the opposing outcome’s stake.

• Celtics Win: Sportsbook A = $110 profit, Sportsbook B = loss of $100 stake, total profit = $10
• Lakers Win: Sportsbook A = loss of $100 stake, Sportsbook B = $110 profit, total profit = $10

However, as mentioned above, this is an extreme example, and you are unlikely to see an odds difference of this magnitude.

This is also why sportsbooks tend to balance the odds at -110 when the sides are equally likely rather than +100. The vigorish, or “vig,” ensures the sportsbook operator still gets a cut of your winnings for handling the betting action and remains profitable even when they have to pay out winnings.

It’s important to note a key difference between arbitrage betting and hedge betting. Arbitrage wagers are aimed at maximizing profits regardless of the result, while hedge bets are wagers made to cover potential losses after large changes to overall odds.

Identifying Arbitrage Opportunities

To successfully practice arbitrage betting, you must be incredibly quick to calculate and exploit differences in odds across several sportsbooks. As mentioned above, these variances are typically addressed in a matter of minutes, if not seconds, making true arbitrage wagering extremely difficult.

One way to identify arbitrage opportunities is to track odds movement over time for the games that interest you. Odds movement is typically the greatest within two hours of the start time of a sporting event, but injury updates, weather patterns, starting lineups, and much more can cause dramatic movements.

Another arbitrage opportunity comes when using an odds comparison tool and noticing when the odds are moving towards “plus money” on either side. These tools automatically display the odds across several sportsbooks for a given betting market, allowing you to track real-time differences instantly.

Finally, live betting can provide the most opportunity for arbitrage wagers. The constant odds movement based on in-game events can lead to delays in line updates, allowing you to take advantage when the differences are greatest.

Calculating Arbitrage Bets

The easiest way to calculate arbitrage bets is to use a calculator tool to determine the ideal betting amounts for each side. Note that you don’t necessarily need both sides to be “plus money,” as you can adjust accordingly to reduce the risks, though this can impact the overall return on investment (ROI).

1. Identify a sports betting market where the odds are different across at least two sportsbooks.
2. Use the highest odds available from each outcome.
3. Input the odds from each side into the calculator.
4. Decide on the total stake amount that you’re going to split across each wager. This amount should be comfortably within your financial means.
5. Using the totals from the arbitrage calculator, place your wagers at the two sportsbooks with the highest odds for each result.
6. Wait for your wagers to settle and collect your profits.

Types of Arbitrage Betting

Here are a few of the types of arbitrage betting:

• Two-way arbitrage: A two-way arbitrage is a scenario where you have two potential options to back in your stake. The most common examples are moneyline, spread, and totals wagers.
• Three-way arbitrage: Instead of having a binary betting scenario, a three-way arbitrage gives you three potential outcomes to back, such as a 1X2 soccer wager.
• Bonus arbitrage: Bonus arbitrage allows you to use bonus bets, odds boost tokens, or other gambling credits to tip the scales in your favor. By using these bonuses, you are effectively reducing the financial risk behind the wagers while increasing potential profit margins.

Advantages of Arbitrage Betting

The main advantage of arbitrage betting is the ability to effectively guarantee a return on your investment. By backing all outcomes across multiple sportsbooks, you’re able to capitalize on market inefficiencies to reduce your overall risk.

When you’re able to successfully practice arbitrage betting, you’ll notice significant growth in your bankroll over time. Unlike hitting a parlay to make massive returns on a small wager, you’re instead generating smaller but consistent profits over time; think of it as a low-risk, low- to medium-yield strategy.

Lastly, unlike other bet types where you can do tons of research and make logical decisions with your wagers only to get burned, arbitrage bets are worth the time and effort. We won’t mince words: successful arbs take practice, patience, and persistence, but it all pays off in the end.

Challenges and Risks in Arbitrage Betting

While the risks associated with arbitrage betting aren’t as great as with other betting strategies, there are still a few challenges that you can run into along the way.

First, to generate larger profits, you’ll need a sizable bankroll when starting out. While arb betting has a high rate of profitability, the realized gains may not be as large as with other methods.

Additionally, you run the risk of sportsbooks changing odds while making your wagers and conducting your calculations. If you don’t have quick instincts and the ability to play multiple wagers at the same time (possibly on different devices), it will be much harder to successfully arbitrage.

Finally, if sportsbooks catch on to your arbitrage betting practices, they may limit the amount of money you can wager. You may also be restricted to certain betting markets, wager types, or withdrawal frequencies.

Arbitrage betting is a perfectly legal strategy, but that doesn’t mean bookies will just “go along with it.” There is also the risk of account closure depending on where you’re gambling.

Tools and Software for Arbitrage Betting

The first tool we recommend for arbitrage betting is an odds comparison tool. Usually available in a web browser or mobile app, odds comparison tools show the odds for a given betting market across multiple sportsbooks, allowing you to quickly browse for inconsistencies.

Another useful bit of software is an arbitrage calculator. This tool will allow you to discern what amount to wager based on your risk amount and on the odds differences, assuming they aren’t the same on both sides (for example, one book at +110 for Side A and another book at -105 for Side B).

Finally, we recommend having multiple screens available, meaning at least two mobile devices and/or laptops. This will allow you to access more information in a shorter time and to place your wagers as soon as you find an arbitrage situation.

Legal and Ethical Considerations

There is nothing legally wrong with arbitrage betting. You’re free to place a wager on any sporting event that is legal in your jurisdiction and posted by the bookmakers.

However, because the strategies nickels-and-dimes the sportsbooks for what amounts to a guaranteed profit, bookies frown on the practice and will often impose limits to discourage the practice.

Strategies for Successful Arbitrage Betting

We recommend the following strategies for successful arbitrage betting:

• Manage your bankroll: Keeping a close eye on how much money you’re betting and winning from each bookmaker is important regardless of the type of betting strategy you use. However, it is particularly important for arbitrage betting because of the next point.
• Stay under the radar: As discussed above, bookies don’t like players who are consistently profiting off them. To avoid account limitations and/or closures, it can be helpful to lose a few bets along the way; it is especially prudent to avoid using the same bookmaker for your big wins.
• Maintain accounts with multiple sportsbooks: To successfully arbitrage bet, sign up for as many sportsbooks as are legal in your state. This will allow you to access even more odds and increase the likelihood of market inconsistencies.

Common Mistakes to Avoid

You’ll also want to be aware of these common mistakes to avoid when arbitrage betting:

• Repeatedly winning from the same book: Players who win consistently, especially those who win large amounts of money, are sure to draw the eyes of the bookies. To whatever degree possible, mix the sites you’re using, especially if two offer equally favorable odds for a given side of your arbitrage wager.
• Failing to do adequate research: Even when the odds seem favorable and an opportunity to arbitrage exists, you should still do some digging to be certain that you’ve got the latest odds. It’s possible that the odds have updated without your knowledge, thus altering your ideal wager amounts and making them less effective.
• Making mental mistakes: The amount of mental focus to arbitrage successfully can be too much at times, leading to mental mistakes. Things like accidentally backing the same side twice, improperly reading and calculating the odds, or inadvertently betting on two different games could all cause your arbitrage strategy to fail.

Arbitrage Betting in Different Sports

Arbitrage betting doesn’t vary as much by sport as it does by bet type. In general, the situations that work best for arbitrage wagers are moneyline, spread, and totals wagers; futures and props are less feasible and much more difficult to make the odds work in your favor.

However, there are a few notable exceptions. In soccer, 1X2 betting is quite popular, so using a three-way arbitrage is more of an option than the two-way arbitrage that is more common in football, baseball, hockey, and basketball.

The pace of play can also impact live betting arbitrage opportunities across sports. In basketball or tennis, odds can change so quickly that oddsmakers may not keep up; conversely, in sports like hockey where scores are lower and odds updates are less frequent, arb opportunities may be harder to come by due to a greater range of odds movement following in-game events.

Tax Implications of Arbitrage Betting

If you’re making arbitrage wagers, it’s safe to assume you’re making money (otherwise, you’re not doing it correctly!). That also means the money you’ve made is subject to taxation.

Gambling winnings are taxable income, so you’ll need to report them as such when filing your state and federal returns. At the state level, there may be additional tax rules beyond the standard income tax rate for your gambling winnings, and you may also be able to deduct your losses from non-arbitrage wagers.

These laws can vary from state to state, so make sure you are familiar with your state’s tax laws before setting out to practice arbitrage betting.

Conclusion

Arbitrage betting is a sound strategy for as long as you’re allowed to practice it, but keep in mind you may expose yourself to limitations on your sportsbook accounts. Consistent winning tends to result in extra attention on your betting activity which can slow up profits.

With that in mind, being patient and alert to arbitrage opportunities can be quite profitable over time. Steady gains, even at a smaller amount, are better overall than mixed results of big wins and large losses.

Use the tools at your disposal, take advantage of sportsbook bonuses when you can, and be decisive when you’re making your bets. The money is out there to be won with arbitrage betting!

Good luck, have fun, and always gamble responsibly!