Step by Step Arbitrage Tutorial
This Step-by-step guide will give you a basic overview of some of the principles involved in fixed-odds arbitrage.
It is a good decision if you want to make risk-free profits using arbitrage.
Hope you will agree that it is better to use your money than leaving it in the bank to earn 2% in a year (you can easily earn 5% in one day with arbitrage) and it’s better than taking a risk in the stock market, which may or may not be kind to you.
There are places around the world where income earned from Sports Arbitrage is tax-free but you should check what the regulations in your country are.
This guide tells you everything you need to know to find your own risk-free bets but I have to tell you that you will need time and some dedication to find all the bets yourself. But there is an alternative – saving you time and frustration.
There are decent engines on a small monthly tax that search for arbitrages, all you need to do is to subscribe. With up to 200 opportunities a day, some of these services seeks out thousands of risk-free, guaranteed money opportunities every month and notifies you in seconds. All you have to do is grab the information, place the bets and count your profits.
Lesson 1 – Action Plan For Placing Risk-Free Bets
Prepare yourself Open all of the important sportsbook accounts NOW so that you are ready for action as sooas an arbitrage is created. You will find all of the information you require here:
If you use the links provided on this site then you will also receive the highest bonuses currently on offer from each bookmaker. These runs sometimes up to 100% so you will find yourself in profit before you even begin.
The reason these companies give out such bonuses is because they know that most gamblers will just lose it by betting, plus a whole lot more. However ,this will not be the case for you, because you will never be gambling.
As an Sports Arbitrage Trader, you will bet, but you will ALWAYS make a profit.
And remember – you will not need to place any funds on any of the accounts until you actually have an arbitrage opportunity to invest in. Find an event likely to yield an arbitrage opportunity. These events include US Football, Basketball, Soccer, Tennis, Golf, Cricket, Boxing, Baseball and a number of others. Lesson 2 will explain in more detail what to look out for.
You can check the online arbitrage–events calendar to see what events are taking place that are likely to yield risk-free betting opportunities:
Check the odds on the events you have chosen Using the internet, check through the prices offered by the bookmakers you have decided to use and make a list of which ones are offering the best prices on the events you are covering.
You can do this with paper, pen and a calculator, but if you want to take this opportunity seriously, consider using spreadsheets.
Calculate the percentages from the odds Use these tables to assess whether the odds you have will produce an arbitrage betting opportunity.
The tables are a rather old-fashioned way of going about this though, and I recommend that you consider upgrading to spreadsheets for this operation – it performs all of the necessary calculations for you, including how much you need to stake on each outcome.
Place quickly your bets Once you have found an arbitrage opportunity, act immediately. Place your bets. It is best to open up 2 (or 3) separate browser windows so that you can have one sportsbook in each. This will allow you to place your bets almost simultaneously.
Write down the activity on your accounts It’s important to keep track of all of the bets you place and the flow of funds. You can customize any accounts software to do this – just set it up to include each bank and credit card account plus each sportsbook account. Note every transaction you make – transfers from account to account, outgoing payments, wagers placed, pending and actual returns. Be sure to give each arbitrage investment its own ID number so that you can easily tie all related transactions together.
Repeat the above steps as many times as you want Yes, it really does work and you really can choose how often you want to generate a risk-free profit.
Lesson 2 – The Two Factors Which Identify An Arbitrage Opportunity
Here is the key to the whole system.
An event will produce the necessary arbitrage – and a guaranteed profit – if the following criteria are satisfied.
Limited number of possible outcomes.
The event that you are betting on should ideally have either 2 or 3 possible outcomes.
For example, the event may be a head-to-head contest, such as a tennis or snooker match, where only one of the players can win. Or you may consider a cricket or football match, where there are three possible results including a tie/draw.
There are exceptions, where arbs become available in events with more than three outcomes, and they can prove to be very lucrative, but you will find your most regular arbs in events as described above.
Adequate percentage margin
When you are beginning, it will probably be better to restrict your betting to opportunities that yield 5% or more. This will allow you a margin for error as you are learning, and any mistakes will probably just result in a break-even situation where you may just have to sacrifice your profit.
However, as you grow in experience, you will be able to consider ALL situations, including the many HUNDREDS of 1%-3% opportunities that occur every month. While the juicier 8%-15% arbs, which pop up a few times a week, will provide you with wonderful bonuses, the smaller, far more frequent ones will consistently add to your bottom-line. It is a reasonable expectation to earn an extra EUR 200- EUR 300 per week from this activity without spending more than an hour a day on it. In fact, it only takes a few minutes to actually place the bets so if you are able to spot an opportunity early, you will spend far less than an hour on it.
So – that’s it. You find the event, do the math, place the bets, and earn a guaranteed profit regardless of the outcome. Once you have streamlined your processes, it couldn’t be much simpler.
The skill is in finding suitable events to bet on. You’ll be able to learn more in detail about this below.
See the “Events with arbitrage opportunities” for the events that have big opportunities to produce arbitrage.
Lesson 3 – Maximise your Profits
Using Biased Stakes
You now know that arbitrage opportunities exist and that they occur frequently in many events. You should now be familiar with the idea of placing bets on every possible outcome and extracting a profit from the price differentials.
Up to now, the assumption has been that you would proportion your stakes equally – in order to receive the same profit, regardless of the outcome of the event. Now you will learn how, by modifying your staking proportions, you can generate even greater profits, whilst continuing to adhere to a zero-risk strategy.
Consider a recent example that occurred in the Australian Grand Prix. Several sportsbooks had joined individual drivers in match-pairs and the bets were based upon which driver would do best out of the two in the race. A nice arbitrage occurred between two of the books and the situation was as follows:
In the match-up between Fischella & Heidfield (I had never heard of them either, nor do I know ANYTHING about motor sports – but that doesn’t matter very much with arbitrage), the prices offered by two bookmakers seemed to be in opposition. YES – the compilers were in disagreement and this meant it was time for me to take the monetary gift they were holding out in front of me.
Fischella was 6/4, which is equivalent to 40.00% (at Bet365)
Betting EUR 400 on this driver would return EUR 1000 if he won
Betting EUR 400 on this driver would return EUR 1000 if he won
By staking EUR 400 on each driver, a return of EUR 1000 was locked-in and guaranteed a profit of EUR 200 regardless of the outcome.
But I decided to add a bit of fun (& the chance for extra profit) to the trade:
By altering my stake to favour Fischella, I put myself in a position to make a really large profit if he won, and still make a small profit if he lost. This is what I did:
Instead of betting EUR 400 on each driver, I bet EUR 325 on Heidfield and EUR 475 on Fischella.
So my total investment was still EUR 800 but the payoffs were like this:
If Fischella won I would receive EUR 1187.50 from the bookmaker – a very satisfying profit of EUR 387.50
If Heidfield won I would receive EUR 812.50 from the bookmaker – a small profit of EUR 12.50
Fischella did win this race and I was rewarded for my choice with a big profit without taking any risk at all.
By altering your stakes in this way, you can generate significantly higher profits from each arbitrage opportunity you take.
It can also be quite good fun!
A large number of opportunities in May 2002 gave risk-free bettors the chance to make windfall gains thanks to the many soccer markets offered in the World Cup.
In particular, the Total Goals and other similar markets in Corners allowed us to take advantage of disagreements between bookmakers, not only in price but also in the range of the results.
An example found on 24th May illustrates this well:
WORLD CUP: TOTAL CORNERS
OVER 599.5 Unibet 7/10
UNDER 630 Canbet 13/8
Arbitrage profit: 3%
You can see that if the actual result was between 600 and 629 inclusive, both bets would win and the total profit would be approximately 103%
This is a risk-free chance to double your money since the worst-case scenario is a profit of 3% if only one of the bets wins.
These types of opportunities appear regularly as similar bets crop up throughout the entire regular football season.
Cross market arbitrages
Not all of bettors know that there are more sophisticated surebet types, which include mixed markets (cross-market surebets). For example, standard, most popular surebet type is 1-X-2 surebet, where all sides are taken from 3-Way line. But do you know that one of these three sides can be taken from another market? If we denote H1(0) as a line for ‘team 1 wins with 0 spread’, then new surebet type H1(0)-X-2 can be built More over there is even another surebet type H1(0)-2X-2. Here we mixed THREE (!) line types: handicap line, 3-Way line, Double Chance. Of course, formulas (to calculate surebet profit) are absolutely another than in case of traditional 1-X-2 surebets. Let us go further – there are ASIAN HANDICAP lines, for example H1(+0.25) which means a line for ‘team 1 wins with a spread +0.25’. In fact this bet is divided into two sub-bets, with spreads 0 and +0.5. So I can prove that there exists a surebet type H1(+0.25)-X-2. Also take into account EURO HANDICAP lines, which are lines similar to 3-Way lines 1-X-2, but they are added a spread.
Lesson 4 – Choosing Your Bookmakers
There are approximately 500 bookmakers out there in cyberspace ready to take bets from you. So why don’t we deal with all of them? More bookies means more arbs, surely?
While a lot of the bookmakers online are legitimate, well-run companies; and even publicly traded companies on the London Stock Exchange, there are also plenty out there that are not entirely honest and, when it comes to paying your winnings, may just disappear.
Our list of companies we deal with is highly selective. However, if you decide that you want to expand your portfolio to include other bookmakers, the crucial elements to consider when choosing them are:
Are they solvent?
This is difficult to tell at first glance. A clue is the quality of the site. Does it look like they have spent lots of money on developing the site? Does it work quickly? A decent betting site with servers quick enough to support a decent number of clients costs around EUR 200,000, plus annual upkeep costs of at least EUR 50,000. A poorly designed and maintained site may well reflect the bookmaker’s ability to pay. Also, check out some of the betting bulletin boards on the Internet which talk about bookies who have and have not paid.
Are they licensed by any government?
The About Us section of the bookmaker’s site (sometimes labelled ‘company information’) should explain where the bookmaker is based and whether they have been issued a licence to trade there. The most stringent checks on businesses are made in the UK, Ireland and Australia. Bookies trading out of Gibraltar and Alderney are also reasonably carefully checked. Those based in the Caribbean and in central America often have official licences which merely reflect that they have paid a fee to the government – very few checks have been made (if any) to see whether they are legitimate operators.
Are the betting odds too good to be true?
You should expect odds to vary – indeed this is how you profit as a Sports Arbitrage Trader. However, if you are considering registering with a bookmaker because they consistently appear out of line with the rest of the market, then try not to let greed cloud your judgement. They may be a completely legitimate operator who you can trust but they may also be an operator who will disappear quickly.
Once you have answered these questions and you are happy that the bookmaker is legitimate, you should test them. Deposit a small amount of money, have a bet and if it wins take your money out. Test their systems to make sure they work as you would expect them to do. Does the money come back to you within the timescale they promised on their website? Is the amount they have paid you correct? If so, then you can probably bet a little more with them. If not, then perhaps it’s better to exclude them from your portfolio of accounts.
Think regularly about the bookies you deal with. Has their behaviour changed at all recently? Do they take longer to pay than they used to? If your answers to these questions are yes then you should perhaps reduce your exposure with them.
What makes a good bookie?
With so much choice available to bettors about where they place their bets, bookies should be competing more and more on customer service.
For sports-arbitrage, the following aspects help to make a good bookmaker:
A good range of coverage and good odds
Some bookies only cover a limited number of events and offer uncompetitive odds on all of them. These bookies do not deserve to have customers & will seldom be of interest to you as a Sports Arbitrage Trader.
A willingness to take a decent sized bet
There are bookmakers who are not willing to accept anything but small bets. In competitive games – for example, live English Premier League, Italian Serie A or Spanish La Liga matches – bookies should accept straight bets of at least £1000 per side without changing their odds.
Good customer service
On the telephone, bettors should expect to talk to operators who have a good knowledge of betting markets. Nothing is more frustrating than trying to place a bet with someone who does not really understand what you are trying to do. On the Internet the site should be easy to navigate and it should not be possible to place bets by mistake. You should be asked to reconfirm your bets (this is a particularly annoying feature of the William Hill site, which does not have a reconfirmation facility).
Bookmakers should be able to provide you with a clear and simple print out of all the bets you have placed with them, going back over months (and even years). They should also tape all conversations you have with them on the telephone so if there is a dispute it can be easily resolved who owes how much money to whom. Mistakes can happen a lot more often than you might imagine.
If you can find a bookmaker who offers these four crucial elements then it is worth sticking with them. It’s amazing how few bookmakers actually are able to make four such simple elements work properly and offer a service that makes you happy to bet with them.
The following list is made up of bookies which manage to fulfil at least three of the four criteria and they should be considered essential acounts for any non-US resident Sports Arbitrage Trader.
Setting up bookmaker accounts is a time-consuming yet essential task for every sports-arbitrage trader.
Lesson 5 – Managing Your Trading Capital Effectively
The ideal bank size for fixed-odds arbitrage will depend upon your objectives. If it is your intention simply to arb on an ad hoc basis, you probably won’t require access to more than EUR 2000 or EUR 3000. This should allow you to invest in 4 or 5 weekly opportunities each yielding EUR 10 – EUR 15 in profit. However, if you want to make as much as possible – betting on every opportunity available to you, with much larger stakes – then you will find that you will require more – perhaps up to EUR 25,000 or more.
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Whilst individual styles and preferences vary, I would recommend that whatever its size , you should aim to invest a maximum of 10% of your bank in any single arbitrage opportunity
This will allow you to maintain a high degree of liquidity, regardless of the actual size of your bank, which means that you will be able to participate in more opportunities, and spread your funds amongst a larger number of bookmakers. In the first instance, this will help to minimise the impact of any errors and losses which occur due to unforeseen circumstances. Maintaining liquidity in this way will also reduce your trading costs, as you will have to withdraw funds from bookmakers less frequently. Whenever possible you should try to effect a withdrawal by means of a losing bet (and a win elsewhere) rather than requesting a payout. Your increased liquidity will allow you to do this far more easily than if you regularly tie up your entire capital by over-trading.
Initially, you may be tempted to bet as much as possible on every opportunity as it appears. While this “slash and burn” approach may have some positive effects on short-term profitability, the likelihood is that it will damage your longer-term prospects as an arbitrageur. Betting the maximum stake all the time will get you noticed by the bookmakers which may or may not impede your progress.
By keeping your stakes lower – say at 75% or 50% of the maximum allowed – you are far more likely be allowed to continue betting at this level indefinitely. Over the long-term, a constant flow of smaller profits will probably serve you better than a short burst of high profits followed by constant frustration over having to pass on arbs or only being able to bet a token amount.
In any case, I would recommend that you keep your trading capital separate from any funds you require to maintain your lifestyle. By ensuring that you do not need to regularly withdraw funds for personal use, you will be able to reduce your transaction costs and by allowing your profits to stay in the system you will find that your subsequent profits grow even faster.
Lesson 6 – Bookmakers & Maximum Stake Allowances
There will be times when a bookmaker will not allow the full stake that you wish to bet. If not approached carefully, this can introduce a element of risk into the arbitrage process. There are some practical ways around this.
In any case, if you are new to arbitrage, bear in mind that it is always a good idea to start betting with small stakes in order to become familiar with the bookmakers used. There is no substitute for experience & it will only take a few successful arbs before you are able to invest fully in each opportunity and join the exclusive club of people making a worthwhile second-income as sports-arbitrage traders.
Take the all of the precautionary steps detailed in the guidebook – they are all listed as a result of several years of professional experience and they will always be relevant.
Many bookmakers show the maximum stake that they will take before you have to commit any funds. This is ideal because it means that you can calculate your stakes according to their limits and place your bets in confidence. However, there are some bookmakers who will not tell you what the stake limit is until you have already attempted to place your bet. This can lead to an exposure if you have already placed the other side of your arb. In order to eliminate this risk, it is important to know which bookmakers these are.
Although this is subject to change over time and should, therefore, be reviewed regularly, the following is a list of bookmakers who do not display the stake limit before the user attempts to place their bet:
One way to circumvent the difficulties presented by these bookmakers’ lack of transparency is to enter an unfeasibly large wager which will definitely be rejected. At that point, the bookmaker will indicate the maximum allowable stake, which is exactly the information you require.
However, the best method is to learn by experience and keep in mind individual bookmakers’ staking patterns – see section “Bookmakers review” for the stake limits
Lesson 7 – How To Find Arbitrage
Using US sports as an example, there are a number of resources available on the web which can assist your arb-hunting. A very good source for price-comparison in US sports is Tip-Ex
If you are looking for arbs in, say NHL, run the ml (money-line) query on the site and it will list the prices available at the bookmakers it scans. This will give you a snapshot of the current markets. You will notice that Tip-Ex does not cover all the sportsbooks that you may deal with, so you should visit each of those sites and make a note of the best prices available.
This technique, timed correctly, will often throw up one or two arbs immediately.
However, the markets in American sports can be quite volatile so begin this process about 90 minutes before the games are due to start, and continually update your manual record of prices, whilst running the Tip-Ex “ml changes” query every few minutes. You will soon start to see that the prices do indeed move around and you should be able to pick out which bookmakers are among the slower to react.
The scope for arbs solely between the US or Island sportsbooks is impressive on its own but if you are able to include prices offered by European bookmakers in your searches, your results will be even better. UK and European books tend to work on higher profit margins than their US counterparts, but they also tend to be slower to update their prices on US sports. This is largely because they enjoy the cushion of high margins but also because very few of them employ staff who are expert in these sports.
Meanwhile, specialist US and Island sportsbooks will react to team news, player injuries and other relevant changes that occur in the various markets.
There are two significant types of opportunity that are created by the above situation:
Playing US books against the slower Europeans is the first.
Playing US books against themselves in a rapidly changing market is the other.
A word of caution though. Whenever you use these free services: the prices are not updated in real-time and are, therefore, sometimes out-of-date.
Lesson 8 – Using Betting Exchanges
Exchanges are specialised betting sites which allow users to place and accept bets with other users – cutting out the sportsbook. As liquidity continues to grow, more opportunities for arbitrage profits present themselves.
They do not set prices or take bets themselves – they act as a medium in which users deal with each other. So, if one user wants to bet on a particular player or team, and another wishes to take that bet, once the price is agreed, the bet is made. The exchange takes a small percentage of the transaction (usually this fee is taken from whoever wins the bet)
Prices on exchanges are often better than those offered by traditional sportsbooks and you can always see the depth of the market so you know how much can be staked.
Betfair is currently the largest and most liquid exchange, and it is well worth opening an account there in readiness for the opportunities that appear.
Profitable exchange strategies
The first of these is the simplest.
Include the exchange on your list of books when searching for arbitrage prices. Often, prices are better on exchanges and this can lead to easy arbitrage profits. Remember, though, to take into account the transaction fee which will be levied if your exchange bet is a winner.
The second method exploits the unique nature of the exchanges, but requires attention to the market you are betting in.
If you are unable to find a suitable price to complete an arbitrage, you may ask for it on an exchange. Of course, there is no guarantee that you will be able to trade at the price you ask, as long as it is not too far from the general market, there is some chance. Of course, you must keep an eye on the opposite side of your arbitrage trade to ensure that your hedge price does not slip away.
The third technique is slightly more involved than the previous two, but allows for greater profit potential.
The exchanges allow you to take on the role of the sportsbook in any transaction. This means that it is possible to back an outcome with a sportsbook and then lay the outcome (close your exposure) on an exchange at a better price. This way you lock-in a profit regardless of the result.
An advantage of this technique is that it can be used in many sports which fall out of the normal portfolio of the sports arbitrage trader.
Take a horse-race, for example, where a particular horse is offered at 5/1 by most sportsbooks, but 9/1 by one sportsbook. After backing the horse at 9/1, you could then offer to lay it on an exchange at 7/1.
When your price is taken, you will have a guaranteed profit of twice your original stake if the horse wins and you will break-even (minus the exchanges commission) if the horse loses. You can easily structure your stakes to ensure a profit regardless of outcome.
The fourth technique allows you to take full advantage of the ability to take on the role of the sportsbook. Sportsbooks make money by taking bets on losing outcomes and this option is available to anyone who uses a betting-exchange. This provides staggering potential for profit.
Consider an average day of horse-racing where there are 3 race meetings, 17 races involving 187 horses. Only 17 of those horses can be winners, which leaves 170 losers on just one day.
By laying bets on exchanges, you can make money from the losers.
Lesson 9 – Minimizing The Impact Of Transaction Fees & Exchange Rates
If you use a credit card to fund your account and you find that you have lost out due to an exchange rate difference, send a polite fax to the bookmaker involved, showing them your credit card statement with the relevant charge on it. Many will credit your betting account with the difference.
It is possible to circumvent exchange rate losses entirely if you are both organised and well-funded. Sending funds by bank transfer is usually free and your betting account will be credited with the exact amount of money that you send. Of course, the transfer may take up to 5 days so you will probably not want to have to do this too often, hence the requirement to be organised. As you will be sending cash to the bookmaker and not using credit, you will need to be well-funded.
Alternatively, you may send money to a bookmaker via Western Union. This transfer of funds is almost instant, your betting account will be credited with the exact amount that you send, and the bookmakers will usually cover your Western Union costs for you if you send more than EUR 500 – some will even pay you a bonus for using this method of funding. In any case, Western Union fees are currently fixed at around EUR 15 when sending funds to a company.
Increasing numbers of bookmakers are beginning to accept payment via intermediaries such as NETeller. These facilities allow you to transfer funds between bookmakers almost instantly, although there may be small fees to pay.
If you are unable or unwilling to use the methods above then the credit card transaction fees are leakages that you will have to accept for the time being. As time goes by, fewer sportsbooks will make these charges. In the first instance, whilst they charge a fee of between 1% and 5% for deposits, many of the same companies pay bonuses of between 10% and 40% upon deposit. The deposit fees are, therefore, more than offset by the deposit bonuses.
You can also take advantage of the many cashback deals offered by credit card companies – receiving a percentage of each and every deposit you make to fund your bets. As a moderately active trader, you will find that your total betting turnover can easily approach £1/3 million annually and credit card cashback can accumulate to a significant trading bonus.
Also, bear in mind that the percentage you make on an arb will be based on the total outlay – whereas the transaction fee you pay to the bookie will be based only on the deposit at that bookie, so the arb will usually still be profitable. (See example below)
Book 1 (charges 3%)
Book 2 (no charge)
Total outlay: EUR 100
Return on arb: EUR 103 (assuming proportionate staking)
If you are backing the favourite at Book 1, the likelihood is that you will stake approximately 70% of your total outlay there. This means that your transaction fee will be 3% of EUR 70 i.e. EUR 2.10
If, however, you are backing the outsider at Book 1, then the transaction fee will be 3% of EUR 30 i.e. EUR 0.90
If the bet that you make with Book 1 is the winning one, then you will receive extra funds on that account which you have not had to pay a transaction fee for.
This means that you will be able to have a few “free” arbs on that account before paying any more transaction fees and this will enhance the profitability of future arbs involving that sportsbook.
There will be occasions (when an arb is very small), where the profits are wiped out by the transaction fees, but if this means that you have funds (i.e. your winnings) on that account for next time, then you are better off even though you did not make a profit on that particular transaction.
You may also choose to weight your stakes to compensate you for extra transaction fees, rather than weighting them just to give you an equal pay-off regardless of outcome. This means that you will win more if the bet at Book 2 wins – to compensate you for having to pay another transaction fee the next time you deal with Book 1.
One thing is certain: to make money with arbitrage, you must actively participate! Once you begin, and start to view the project as whole, rather than as a series of individual trades, the scope for profitability becomes very clear.
What do I need before starting?
0) Choose a surebet software (we highly recommend the leader)
1) Open and verify the accounts in the top recommended bookmakers for beginners which count and names are described in the units.
2) Open an e-wallet account and fund the bookmaker’s accounts.
3) Get fast internet connection and computer to be able to open the bookmaker’s pages quickly. UPC- Internet-500
4) Learn what is the recommended frequency of placing bets and what should be the maximum amount if you want your account to last longer and stay under the bookmaker’s radar.
5) These are the most important things you must have in mind before start placing sure bets. But there are many other important things that you must know, for example, how much money you will win per month on base other arguments that are covered in the units.
THE CHECKLIST BOOKMAKERS SURE BETS SERVICES
Get fast and good internet connectivity
Make sure your bankroll is large enough
Open multiple bookmaker accounts
Get digital wallets for online payment
Subscribe to a sure bets service
Load your bookmaker accounts with money Find sure bets from you arbitrage service
Place bets on all sides involved Collect winnings and REPEAT! We have listed different