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ελληνικά
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Arbitrage opportunity defined
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An arbitrage opportunity in sports betting arises when a person is able to bet on all of the possible outcomes of a certain event at odds that guarantee profit regardless of the final outcome of that event. Such opportunities are widely known as “surebets” or “surewins”. Most sports events have 2 possible outcomes (no draw result, e.g. baseball, basketball, tennis, hockey, football) or 3 possible outcomes (draw result possible, e.g. soccer). Betting on these outcomes is the most widely spread type of betting, known as “line betting”. Such opportunities occur when a bookmaker’s odds on a certain outcome of the event fluctuate compared to the rest of the market.
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First reason why arbitrages occur |
Bookmaker differentiation - an upcoming sports event typically has 3-4 leading bookmakers that are usually the first to offer odds. Usually, most other bookmakers who do not have the necessary expertise, knowledge or resources to closely follow the given championship wait for the leaders to establish the “market” before adjusting their own odds. There is always a third group of bookmakers who have their own views or try to be attractive by offering above-average odds, leading to arbitrage opportunities.
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Second reason why arbitrages occur |
Bookmaker hedging - a bookmaker often seeks a hedge against a potential loss, thus creating an arbitrage. Considering the game between the Yankees and the Whitesox can help illustrate this:
Every bookmaker’s goal is to try to secure a margin on each event offered by adjusting their odds according to the desired margin. As people often wager disproportionately more on one of the outcomes (e.g. The Yankees to win) bookmakers try to hedge themselves by attracting wagers on the other outcome in order to reduce their net loss in case the public wins. This can be achieved by lowering the odds on the Yankees and raising the odds on the Whitesox. As a result, the bookmaker remains intentionally “exposed” with respect to that outcome with the clear view that this is required for a successful hedge. As there is no reason for the rest of the market to change, the bookmaker just created an arbitrage opportunity.
Numerous such situations occur daily and are usually created by bookmakers on purpose, so they can hedge their exposure.
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Example of how an arbitrage occurs |
The market on the above game opens at 1.80 for the Yankees versus 2.10 for the Whitesox, leaving a 3% margin for the bookmaker. As time passes, bookmaker A accumulates $15,000 on the Yankees and only $1,800 on the Whitesox. Should the Yankees win, this bookmaker would lose $10,200 (payouts of $15,000*1.8 less the amounts wagered of $15,000 and less $1,800 wagered on the Whitesox). The bookmaker’s goal, at this point, is to stop accumulating wagers on the Yankees by lowering the odds to 1.65 and at the same time become more attractive on the Whitesox by raising the odds to 2.4. The rest of the market stays the same thus creating a surewin of 2.86% between bookmaker B who still keeps the Yankees at 1.8 and bookmaker A who has the Whitesox at 2.4.
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