Arbing refers to taking odds on both outcomes of an event when the mathematical difference between the odds available creates an opportunity to lock in a positive financial result.
It is a shortened way of saying ‘arbitrage betting’, and the idea actually comes from the financial markets.
Traders would buy and sell the same thing (a currency or commodity etc.) at the same time on different markets and pocket the difference.
For example, a trader might buy corn for 760p on one market, say the London Stock Exchange, then sell it on the New York Stock Exchange where the price is slightly higher at 762p. That’s 2p made on every unit bought/sold, so buying and selling in large quantities could make them good money if they spotted and exploited the opportunity in time.
The same idea applies to arbing in betting, but instead of buying and selling a product, you are backing and laying an outcome.
With so many different bookmakers in operation alongside the betting exchanges, you can sometimes find prices at different places that create an opportunity for financial gain regardless of the outcome.
You are looking for a situation where the implied probability of both outcomes adds up to less than 100%. In most betting markets the implied probability will add up to over 100% because of the bookmaker’s margin that is applied on top, but for an arb to work it must be under 100%, because that difference is the arber’s edge.
The sport or event is totally irrelevant when arbing, all that matters is the numbers. So you don’t need to understand the sport you are betting on, you just need to see that the numbers add up and make the bet before the odds change and the opportunity disappears.
How Does Arbing Work?
The first rule of arbing is that the back wager must be higher than the lay. So you would usually (but not always) end up placing the back bet at a fixed odds bookie because you are betting that something will happen.
The lay bet will always be placed at a betting exchange if it is a true lay bet, because a lay bet is a bet that something will not happen, and this cannot be done at fixed odds bookies. However, if the numbers are right you can simply back one outcome at Bookie A and back the other at Bookie B and it is the same idea, although it works a little differently.
As an example, if you found odds of 2.50 (6/4) to back something at the bookie, and odds of 2.30 (5/4) to lay it at an exchange, there is an opportunity here. That 0.20 difference is the juice, representing a 3.08% yield allowing for commission.
It’s not much, so you would need to bet a large enough amount to make it worth it, but that will depend on the sort of money you have available so we will just use a £100 back stake for the example.
Example: Bookie and Exchange Arb
You bet £100 at the bookie and at odds of 2.50 you stand to win £150 if the back bet wins.
You will need to lay £109.65 (the amount you want to win) at the exchange at odds of 2.30, and you will need a liability of £142.54 to pay out those who matched your bet if you lose. The liability is the minimum you need in your exchange account to make the lay bet.
This is a total outlay of £242.54 to make this arb.
If the back bet wins you lose your £142.54 at the exchange but win £150 at the bookie, for a net return of £7.46.
If your lay bet wins you lose your £100 at the bookie but win £109.65 at the exchange, minus 2% commission (£2.19) the exchange charges on all winning bets, for a net return of… £7.46.
To work out the lay stake, we take the back bet odds of 2.50 and multiply them by the back stake of £100: 2.50 x 100 = 250.
We then take the lay odds of 2.30 and subtract any exchange commission, which in this case is 2%, so: 2.30 – 0.02 = 2.28.
Lastly, we divide the 250 by the 2.28 to get our lay stake: 250 ÷ 2.28 = 109.65.
Once you pop this amount into the exchange it will tell you the liability required to make the bet.
So it’s a big outlay to win quite a small amount in this example, but if the difference between the back and lay odds is greater, then so is the potential return on investment.
Around 4%-6% is quite common, but you can find arbs worth 10%-15% from time to time.
Plus, as previously mentioned, staking larger amounts will also yield greater results, but this might not be possible for you because of the funds required.
We said it was also possible to arb between two bookies bet backing the two different outcomes at different bookmakers rather than using an exchange.
The maths is a little different here so we will run through another example to explain it.
Let’s use the same odds though to keep things consistent and make it easier to follow; you can then also notice any differences to the end result.
Example: Bookie to Bookie Arb
First we need to calculate the implied probability to work out how much to stake at each bookie.
To do that we divide 1 by the decimal odds, then multiply the answer by 100.
- 1 ÷ 2.50 = 0.4 x 100 = 40
- 1 ÷ 2.30 = 0.43 x 100 = 43.47
So the implied probability of Outcome 1 is 40% and the implied probability of Outcome 2 is 43.47%. Added together this gives us a combined total of 83.47% leaving a very tasty margin of 16.43%.
Now we need to work out our stake for each bet, and to do that we need to decide on a total amount we are happy to stake. Our total outlay in the previous example was £242.84, so let’s round that down to £240 for simplicity.
The maths here is to take the total stake of £240, multiply it by the implied probability of each outcome (40% and then 43.47% in two separate calculations), then divide that by the combined market margin of 83.47%.
- 240 x 40 = 9,600 ÷ 83.47 = 115.01
- 240 x 43.47 = 10,432.8 ÷ 124.98
So your bet on Outcome 1 (odds of 2.50) would be £115.01 and your bet on Outcome 2 (odds of 2.30) would be £124.99, giving you a total outlay of £240.
If your bet on Outcome 1 wins then you lose your stake of £124.99 on Outcome 2, but you win £172.51 for an overall return of £47.52.
If your bet on Outcome 2 wins then you lose your stake of £115.01 on Outcome 1, but you win £162.49 for an overall return of £47.48.
This obviously looks a million times more attractive but remember we have just plucked these odds out of thin air so the chances of finding anything with a 16%+ yield are slim.
For demonstrative purposes though you can see how it works whether you find the opportunity at two bookies or at a bookie and at an exchange.
There are also software services out there that can not only do the maths for you if you input the odds, but even some that can find arbs in the first place so all you have to do is place the bets. They aren’t free though.
Is Arbitrage Betting Legal?
Since arbitrage betting is using your brain to take advantage of mathematical differences between different bookies there is nothing illegal about it.
A good arber is simply skilled and intelligent enough to spot and exploit an opportunity, they aren’t breaking any laws or stealing or anything like that.
However, bookmakers have the right to refuse service to anyone and have their own in house terms and conditions, so while there is no law to prohibit you from arbing there is equally no law that says the bookie has to let you do it.
Still, you won’t end up in court for it or anything, but you might end up in the bookies bad books.
The Problem with Arbing
Although arbing works so long as the maths are sound, it isn’t always easy.
Finding the opportunities without software (that usually costs money unless you can create it yourself) is difficult, but not impossible, although you will need to be quick to make your bets before the odds move.
On top of this, the margin that you can make is often fairly small, so you need to do it a lot to make it worthwhile unless you can place very large bets. But the larger your bet the more likely the bookie is to spot what you are doing, and the more money you will need in your exchange account as liability which can be prohibitive to a lot of people. That takes us on nicely to the next issue.
Even if making smaller bets, you will still need a good deal of money in your exchange accounts in order to cover your lay bets, as you are essentially operating as a bookmaker for these, and will need to pay out if/when your lay bets lose. Of course, if your lay bet loses it means your back bet has won, so the money is essentially just in a different place, but you still need a fair whack up front in order to arb.
When backing an outcome you only need the amount of your stake, so you don’t have the same issue with your back bets.
Given the amount of money at stake even for smaller arbs, any tiny error or mis-timed bet can cause catastrophic losses.
Lastly, if a bookie catches on to what you are doing they may well close or limit your account. This is known as ‘gubbing’, and it makes it impossible for you to carry on.
The bookie will either not allow you to bet at all, or limit your stakes to such small sizes that it’s just not worth the effort.
There are strategies that really determined arbers use to hide what they are doing, such as making ‘mug bets’, only backing in betting shops using cash, and rounding stake sizes up or down, but online bookies are pretty good at spotting arbitrage betting patterns, so most people who arb are living on borrowed time.