Betfair Review: What is the difference between Arbitrage Betting and Trading and can I profit?

Updated: 7054 Other

What is Arbitrage Betting and can I profit?The (very) short answer to the second part is of course,yes.Simplistic as it may sound, this is because Arbitrage betting(arbing) is not actually betting (gambling) at all, because thereis no risk involved once

Betfair Review: What is the difference between Arbitrage Betting and Trading and can I profit?
Darren Brett
Darren Brett Tipster Competition Manager

Horse Racing, greyhounds and snooker specialist with thirty years experience of writing about sport across multiple platforms. A QPR and Snooker fan

What is Arbitrage Betting and can I profit?

The (very) short answer to the second part is of course, yes.


Arbitrage Betting

Simplistic as it may sound, this is because Arbitrage betting (arbing) is not actually betting (gambling) at all, because there is no risk involved.
Once the bets are placed If done proficiently, a profit is guaranteed at the moment you place the bets.

To read more on this type of bet please visit the betting school article on arbitrage theory.

How can that be, you may ask?

The easiest way to explain this is to show the difference between trading and arbitrage.


Arbitrage Betting

Look at it this way, If you buy something for £10 and keep it for a while before trying to sell it for a profit, you are trading. 
When subsequently selling the item for £11 you have made a profit.
However, the value of the item may drop after you purchased it, and when you eventually sell it for £9 you have made a loss on your trade.
Similarly, if you back a horse at 9/1, you may be able to trade/lay it later at 8/1 (a profit) or 10/1 (a loss) on Betfair.
In both scenarios, there was an element of risk involved, as in all trades.
The same is not the case with arbitrage. 
The object is to only buy it for £10 if you can sell it for £11 at the same time, thereby eliminating the element of risk. 
In betting terminology, that equates to backing a horse, football team, or whatever at one price and laying it at a smaller price simultaneously.
In an event such as a tennis match that only has two possible outcomes, the same result can be achieved by backing BOTH players, again with the proviso of doing so at the same time.

How is this possible?

In truth, arbing often involves working to very small fractions, and making as much as 5% on a regular basis would be a struggle. 


Arbitrage Betting

Excluding the exchanges for the moment, bookmakers create odds for an event; initially independently most of the time. 
There will be slight variations in these odds, and particularly when there are just two options, it will be possible to back them both at the same time, but with different bookmakers, adjusting stakes so that your return and, therefore, profit would be the same whatever the outcome. 
With the advent of betting exchanges, another possibility evolved; backing a selection with a bookmaker and laying the same outcome on the exchanges. 
One must be careful here, though, as the commission will usually need to be paid on any winning exchange bet.
Meaning that the profit on that part of the arb could be reduced by anything up to 5%.
It is also possible that an exchange will charge a smaller commission rate but on both winning and losing bets.

The major problems with arbitrage

There are two massive problems that become something of a Catch 22 situation. 


Arbitrage Betting

To make arbing worthwhile, significant sums of money may be necessary at times.
This may prove difficult if a market has little liquidity. 
If you overcome that issue, the bookmakers are on the look-out for people doing just this, and that can rapidly lead to your account being restricted, or even closed. 
Don't be fooled into thinking that this applies only to people betting in large sums; once spotted as an ‘arber', your days are likely to be numbered even with quite small stakes. 
Check out the arbing school page if you wish to investigate further

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