Latest Cases - May 2011

Sports Betting Arbitrage - Beating the bookie at his own game

5th May 2011

Good afternoon, friends,

In this issue of Punters' Verdict....

  • Beating the bookie at his own game....
  • A crucial difference of opinion....
  • Profiting from the 'under round' book....

Beating the bookie at his own game....

Last week 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. For a quick
recap just click here...

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. 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. He will soon discover that the market prefers to strike
bets with the bookmaker offering the best prices.

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.

A crucial difference of opinion....

Let's stick to using a snooker match to illustrate my point. A
snooker match is a two-runner event.

Let's say Peter Ebdon and John Higgins are down to play in Round One
of the Punter's Verdict Open.

Now let's say that Victor Chandler price it up like this:

Higgins 2/9
Ebdon 3/1

Now let's say that bet365 see it this way:

Higgins 2/5
Ebdon 7/4

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 Victor Chandler are saying that John Higgins has an 81.81%
chance of winning the game. And by pricing Peter Ebdon 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
Victor Chandler 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
Ebdon 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 big 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....

Profiting from the under round book....

If we back Higgins at 2/5 with bet365 and we take the 3/1 about
Ebdon offered by Victor Chandler how would the percentages look
then?

We can get Higgins at 2/5 (71.42%) and we can get Ebdon 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 Ebdon 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
capitalises 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 - identifying the two-runner
events, figuring out if there is an under round book to be made and
actually getting your money down - at the right prices - with the
bookmakers concerned. There's some work involved in every good
profit opportunity....

But the money is there to be made... for those punters who want to
make it...
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....

I'll be back with the Verdict next week.

The Judge

www.PuntersVerdict.co.uk

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