With so many bookmakers offering boosted odds, particularly for the AFL and NRL, it’s worth going over the arbitrage opportunities that these promotions create.
This article illustrates how to make biased and unbiased arbitrage plays using boosted odds promotions. Examples are provided using both bookmakers and betting exchanges using the Hedging Calculator and the Betting Exchange Arbitrage & Hedging Calculator on this website.
Odds Promotions
Over the last year or so a popular bookmaker promotion is to offer boosted odds on a particular event outcome, with a limited maximum stake.
For the AFL and NRL the most common promotion is to offer 2.00 odds on the favourite, but you will also see boosted odds for particular HT/FT selections as well as margins and line markets.
For horse racing you will often see boosted odds on one particular runner.
These promotions more often than not create arbitrage opportunities.
You can view all active promotions in the Bookmaker Promotions section.
What is Arbitrage?
In the context of sports betting, arbitrage involves the placing of two or more wagers on a sporting event to make a guaranteed profit, or at least make no loss, regardless of the event outcome.
In markets with only two possible outcomes, you can quickly determine whether an arbitrage opportunity exists by taking the reciprocals of the decimal odds. If the sum of these reciprocals is less than 1.00 then an arbitrage opportunity exists.
For example, in a two-outcome head-to-head market, if one bookmaker offers 1.65 odds on Team A while another bookmaker offers 3.00 odds on Team B, we can determine that an arbitrage opportunity exists because 1/1.65 + 1/3.00 = 0.94.
If you have a betting exchange membership, an arbitrage opportunity arises if the lay odds, adjusted for commission, are less than the back odds with a traditional bookmaker.
Learn more about arbitrage in the Beginner’s Guide.
Biased vs. Unbiased Arbitrage
A spectrum of strategies exist when an arbitrage opportunity arises. This article will focus on the two ends of the spectrum, which we call biased arbitrage, as well as the popular unbiased arbitrage approach.
Biased Arbitrage
Biased arbitrage is a strategy that seeks to make a profit if the outcome you believe represents the best value occurs, while making no profit or loss if you are wrong.
Using the example mentioned previously, if you believe the 1.65 odds on Team A represent great value, you can place $20 on Team A and $10 on Team B. This will yield a $3.00 profit if Team A wins, and no profit or loss if Team B wins.
Conversely, if you believe the 3.00 odds on Team B represent the best value, you can place $20 on Team A and $13 on Team B. This will yield a $6.00 profit if Team B wins, with no profit or loss if Team A wins.
Learn about the mathematics of biased arbitrage.
Unbiased Arbitrage
Often, arbitrage opportunities will present themselves for fixtures where you have no strong opinion on either team. In this case you can employ unbiased arbitrage, which yields the same profit regardless of the event outcome.
Using the previous example, if you wagered $20 on Team A and $11 on Team B you would make a $2.00 profit regardless of which team won.
Note that unbiased arbitrage yields a lower maximum possible payout than biased arbitrage but it has a higher minimum possible payout. For this reason it is less risky than adopting a biased approach.
Learn about the mathematics of unbiased arbitrage.
Real World Scenario
In Round 1 of the 2016 AFL season the typical head-to-head odds for Richmond vs. Carlton were:
Richmond – 1.26
Carlton – 4.10
Note that 1/1.26 + 1/4.10 = 1.037553. This is higher than 1.00 so no arbitrage opportunity exists at these odds.
As a promotion, one bookmaker offered 2.00 odds on Richmond in the head-to-head market with a $20 stake limit. You can immediately see that this creates an arbitrage opportunity, but for the sake of completeness, we can prove this with the calculation 1/2 + 1/4.1 = 0.743902.
Whenever an arbitrage opportunity presents itself there are two key ways to take advantage:
1) Back Richmond at 2.00 odds and then back Carlton at 4.10 odds
2) Back Richmond at 2.00 odds and then using a betting exchange to lay Richmond. The lay odds at the time were 1.28.
The option you choose will be determined by the one that yields the greatest profit. For the sake of this example we will assume that we have no strong opinions of the value of each selection so we will only compare the unbiased arbitrage strategies.
Arbitrage By Backing the Other Selection
Our first option is to back both Richmond and Carlton in the head-to-head market.
Suppose the best available odds on Carlton in the head-to-head market with any bookmaker or exchange is 4.10.
Using the Hedging Calculator on this website, you are provided with the following output:
The strategy:
| Stake | Odds | |
|---|---|---|
| Original bet | $20.00 | 2.00 |
| Hedge bet | $9.76 | 4.10 |
Profit / loss table:
| Profit if Richmond Wins | Profit if Carlton Wins | |
|---|---|---|
| Original bet | $20.00 | -$20.00 |
| Hedge bet | -$9.76 | $30.26 |
| Combined wagers | $10.24 | $10.26 |
By placing a hedge bet of $9.76 on Carlton we can lock in a profit of roughly $10.25, regardless of the event outcome. Note that the actual payouts vary by two cents due to the hedge bet being rounded to the nearest cent.
Note that in the event of a draw, providing we have wagered in a two-outcome market (used by the majority of Australian bookmakers), then we would receive a half payout for each bet. The result would be still a net profit of $10.25, so we are covered for all potential scenarios.
Arbitrage By Laying the Original Selection
Instead of backing Carlton to lock in a profit, we could use a betting exchange such as Betfair to lay Richmond. Learn more about betting exchanges.
Using the Betting Exchange Arbitrage & Hedging Calculator on this website, you are provided with the following output:
Note we have assumed a betting exchange commission of 5%. You can view a screenshot of the calculator inputs at the top of the article.
The strategy:
| Back / lay | Stake | Odds | |
|---|---|---|---|
| Original wager | Back | $20.00 | 2.00 |
| Hedge wager | Lay | $32.52 | 1.28 |
Profit / loss table:
| Profit if Richmond Wins | Profit if Carlton Wins | |
|---|---|---|
| Back wager (after commission) | $20.00 | -$20.00 |
| Lay wager (after commission) | -$9.11 | $30.89 |
| Combined profit (after commission) | $10.89 | $10.89 |
By placing a lay bet of $32.52 on Richmond at 1.28 odds we can lock in a profit of $10.89, regardless of the event outcome. This exceeds the $10.25 profit if we backed Carlton at 4.10 odds, so in this particular example we are better off laying Richmond using a betting exchange.
The advantage of using a betting exchange to lay the original selection is it can easily be applied to markets with more than two possible outcomes. For example if a bookmaker offers boosted odds on a particular horse, you can simply lay that horse in the same fashion as the head-to-head example above.
Betting Tracker Spreadsheet
Entering the wagers into our betting tracker spreadsheet should provide confirmation that the arbitrage bets have been set up properly.
Note that the potential payout figures are the same for both bets. The total amount at risk is $20.00 + $9.11 = $29.11. The payout will be $40 for a profit of $10.89.
In this particular fixture Richmond defeated Carlton so the two bets are updated accordingly.
Arbitrage Tools & Resources
Here are the tools and resources to assist with your arbitrage betting:
Hedging calculator
To be used when you wish to place two back bets to lock in an arbitrage profit.
Betting exchange arbitrage & hedging calculator
To be used when you want to place a lay bet to lock in an arbitrage profit.
Betting tracker spreadsheet
Enables you to track your betting performance.
Beginner’s guide to arbitrage
Learn about the mathematics of arbitrage.