Securing Risk-free Arbitrages on Betting Exchanges

Most people have now become familiar with the concept of arbitrages, and the opportunities which betting exchanges create in order to secure an arbitrage.

As a very brief explanation to those who may be unfamiliar to the term, an arbitrage is the practice of taking advantage of a state of imbalance between two or more markets. A combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices.

In the case of the betting exchange, the two markets would represent the back side of the bet and the lay side. In order to create a risk-free arbitrage, a punter would lay a horse at a price, and then back the SAME horse when it's odds have increased. The same applies to backing a horse, and then LAYING the same horse if it's odds decrease.

A simple example is offered:

I have £1000 in my account

I look at the horse SIR MONTY in the 4:10pm at Salisbury.

At 4:05pm I lay the horse for £100 at odds of 3.0 (my account increases temporarily by £100 - now showing £1,100) the horses odds begin to increase

At 4:09pm I back the horse for £75 at odds of 4.0 (£75 now leaves my account - now showing £1,025)

If the horse wins:

I will lose £300 from my account from the lay bet (now showing £825)

I will also win £300 from my back bet (now showing £1,025)

Profit made £25

If the horse loses:

I have lost my £75 stake, but kept the £100 lay

Profit made £25

This in effect is an arbitrage. (This is merely an example, and you should always take into account the exchanges commission which will be deducted from winning bets - there is a very good, and completely free arbitrage calculator available here.

But how can we tell which direction the odds are going to shift in order to secure the arbitrage?

There are various methods for doing this:

1. Who do the top tipsters predict will win the race?

It is incredible just how huge the level of influence these tipsters have on the uk race market. Many top tipster have become household names, with the Sun's Templegate and the News of the Worlds Pegasus being two of the more common ones. If Templegates 'NAP' (best bet of the day) is priced above 5/1 more than 60 minutes before the race is due to begin, and there isn't any odds-on favorite in the same race to oppose it, the NAP's odds will regularly tend to decrease. In this situation You would back early, and then lay the horse closer to the start of the race as it's odds decrease. This will help you secure the arb.

A good source of NAPS can be found at http://www.dailynaps.co.uk which provides a free daily race-card of uk naps.

2. Watch for changes in the weather!

This may seem obvious to some, but the changes in the weather can adversely affect the outcome of a race. For example, you get up at 6am and hear on the news that there is a high probability of rain later that day. You notice on the exchange that the odds-on favorite in the 3:30 at Ascot is trading at 1.6. After some checking, you see that this favorite has only ever won on firm ground. If it does happen to rain, the ground will soften, and the likelihood of this horse winning decreases. So in this case you lay the horse early, and closer to the start of the race the odds should drift out, which is when you then back the horse. Again, creating an arb.