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Thursday, 2nd June 2016
Good afternoon, friends,
In this issue of Punters’ Verdict….
Last time we took a look at how the bookmakers seek to trade profitably on any sporting event - whatever the outcome - by creating what is known as an 'over round' book.
It's the over round book that ensures bookmakers live in big country piles, razz up and down in brand new Jags and smoke Havana cigars while most punters lose money over the long term or break even at best….
But the over round principle doesn't always have to work in the bookmaker's favour. Quite the contrary.
There are hundreds of opportunities every week to turn the principle completely on its head and ensure that we - the punters - make the profit on a sporting event regardless of the actual outcome.
It's a process known as 'arbing'. And here's why the opportunities arise....
Bookmakers are in competition with one another and price is a crucial area where bookmakers simply have to be competitive.
Any bookmaker who tries to increase profits by simply offering punters the worst prices on the block - across the board - will soon find himself out of business (anybody remember Blue Square?).
That bookmaker will soon discover that the large majority of the market prefers to strike bets with the bookmaker offering the best deal on price.
So bookmakers - to a man - bow to market forces and they all tend to bet to similar margins on the two-runner events of interest to the 'arbers'. They generally seek to make a 5% to 7% profit on the event.
Now, that's not a big margin. A mistake by a trader, a difference of opinion between one bookmaker's trading desk and another or simple weight of market support for one participant over another (forcing a change in price on individual bookmakers) can tilt things another way.
In fact, things can tilt so far that the bookmaker's profit margin is wiped out completely - putting the book in the punter's favour and creating what is known as an ‘arbitrage opportunity’.
Let's stick to using a snooker match to illustrate my point. A snooker match is a two-runner event.
Let's say Judd Trump and John Higgins are down to play in Round One of the Punter's Verdict Open.
Now let's say that Ladbrokes price it up like this:
Now let's say that bet365 see it this way:
They both see the match slightly differently. For whatever reason - be it human error, opinion or weight of money - they each assign a different percentage (in the form of odds) to each player's chance of winning.
At 2/9 Ladbrokes are saying that John Higgins has an 81.81% chance of winning the game.
And by pricing Judd Trump at 3/1 they are saying he has a 25% chance of winning the game.
If we add those two percentages together we can see that the bookmaker is betting to a total over round of 106.8%.
Theoretically Ladbrokes would be looking to make just under 7% on this market. The book is over round and in favour of the bookmaker.
On the other hand, by pricing Higgins at 2/5 bet365 are saying that Higgins has a 71.42% chance of winning the game.
And by pricing Trump at 7/4 they are saying he has a 36.36% chance of winning.
It's a different opinion but when you add the percentages together the book is still over round to the tune of 107.7%. Different opinion yes - but still a book that's in favour of the bookmaker.
When I say 'in favour of the bookmaker' what I mean is that you can't back both competitors with the same bookie and make a profit whichever player wins the game. But... and it's a big but...
....you CAN back both competitors and make a profit - whichever player wins the game - if you take the best price on offer about each player wherever it appears....
If we back Higgins at 2/5 with bet365 and we take the 3/1 about Trump offered by Ladbrokes how would the percentages look then?
We can get Higgins at 2/5 (71.42%) and we can get Trump at 3/1 (25%).
Added together those two percentages come to 96.4% - and that's an under round book. Not an over round book - one that's in favour of the bookie. This is an UNDER ROUND book - a book that's in favour of the punter.
If we put £71.40 on Higgins at 2/5 we can guarantee a £100 return.
If we put £25.00 on Trump at 3/1 we can guarantee ourselves a £100 return.
In other words we can get £100 back for every £96.42 we can get on!
We make a cool 3.58% profit on our outlay - whatever the outcome of the game.
This is classic arbitrage. It's a no-risk opportunity that capitalizes on the inefficiencies of the market.
And these opportunities to profit on the small differences of opinion between bookmakers appear in their DOZENS day after day after day.
Sure, there's a little work involved….
It’s not an effort-free opportunity. But a bit of work is par for the course? There’s work involved in every good profit opportunity that’s worth exploiting....
But the money is there to be made... for those punters who want to make it... and who are prepared to do what the opportunity requires….
Show me the bank which will pay you 3%... 5%.... 6% on the same £100 time and time again over the course of a sporting week... because I'm yet to find it....
That is exactly the profit opportunity that sports-betting arbitrage presents – every single day of the week, 365 days per year.
You’re never going to retire on the proceeds. That’s for sure. But if you’re looking for a surefire way of making a few quid here and a few quid there out of the same recycled stake – and it can add up over the course of a week – then sports-betting arbitrage is a profit spigot like no other.
It’s as easy as making profits in the sports-betting markets ever gets.
More to come….
I’ll be back with the Verdict next week.