Arbitrage betting or arbing is a method of trading on betting exchanges that guarantees a profit by exploiting price differences between and within markets. Throughout this article, you will learn what arbitrage betting is, how to make arbitrage bets, and how to identify arbs.
Table of Contents
Arbitrage Betting Explained
Trading arbitrage is a technique that uses price differentials between two markets to ensure a profit regardless of the outcome. It is common practice for traders on the stock exchange to engage in arbitrage, whereby they buy stocks at one price and sell them for a higher price on another.
Similar principles apply to sports betting, since a betting exchange is similar to a stock exchange in its makeup, but you must learn how a betting exchange differs from a bookmaker. The practice of sports arbitrage has traditionally been accomplished by placing bets at multiple high street bookmakers secretly. The advent of online betting and betting exchanges, however, has transformed arbitrage betting and eliminated the need for this taxing work.
You can arbitrage sports betting by putting bets on the outcome of all events at odds that guarantee you a profit, regardless of what happens. Sports arbitrage betting is more of a medium-yield, low-risk investment strategy than gambling, which carries higher risks. If any bookies offer sign up bonuses, then it is even easier for you to take advantage of this technique.
Market Efficiency and Arbitrage Opportunities
The key to understanding arbitrage betting is understanding market efficiency. Information plays a crucial role in setting a betting market’s price; the quality of the information, who has access to it, and how fast it is made available determines the market’s efficiency.
All market participants would be efficient if they had access to 100% accurate information. Additionally, an inefficient market would exist if no one had information, or if they were unable to make good decisions based on poor data.
Traders and oddsmakers acquire and respond to information in different ways and within different time frames, so no market can be considered 100% efficient – or there would be no arbitrage opportunities. A market’s movements are influenced by the dispersion of information quality, the speed of its availability, and the interpretation of the information. As a result of this inefficiency, arbitrage opportunities arise.
Arbitrage and Betting Exchanges
In spite of the fact that bookmakers don’t generally offer differing odds, arbitrage opportunities can be difficult to find. Thus, they constantly monitor their competitors’ odds to ensure they are competitive. Furthermore, arbitrage bettors are profitable players, so they don’t want them on their site. Even though arbitrage opportunities between bookmakers still exist, it’s more convenient to use a betting exchange.
There is a significant difference between a betting exchange and a bookmaker in terms of their business model. A betting exchange makes money charging a small commission instead of balancing their books in such a way as to maximize their chances of making money regardless of the outcome.
There are no odds set by the exchange, unlike a bookmaker. Rather than facilitating trading, it facilitates a platform for it. Due to this, exchange users set the odds, which are subject to considerable variation.
Arbitrage bettors are welcome on betting exchanges, and since they can trade like stock exchanges – back and lay – it naturally produces arbitrage opportunities known as ‘trading a market’.
If you place a bet on the betting exchange and then back the same outcome in the future, you will be able to hedge your backed bets, or vice versa. By using either strategy, you will be able to; guarantee that profit regardless of the event’s outcome, while also limiting your potential losses.
