Arbitrage betting, trading and hedging

  1. Arbitrage betting
    Taking advantage of the difference in odds offered by different sportsbooks to guarantee a profit no matter what the end result is. This is also called scalping.
  2. Trading
    Taking advantage of the change in odds over time to guarantee a profit no matter what the end result is.
  3. Hedging
    Betting back against your original bet to reduce or eliminate the amount you can lose.

There is a lot more to being a winning sports bettor than slapping some bitcoins down on a team you think will win. If you can get your head around these concepts and give them a go you will be ahead of 95% of other bettors and have a good chance at long term profitability. Plus it is good fun!

Arbitrage betting

If 2 sportsbooks have very different odds on the same event you can guarantee yourself a profit no matter what the outcome is! For example if American sportsbooks take a lot of bets for Team USA to beat Germany in the 2018 FIFA World Cup they may have to offer higher odds on Germany to attract bets and reduce their risk if Team USA wins.

So if Germany’s probability of winning justifies odds of 1.65 you could get them at 1.80. The same thing will happen in reverse with a German sportsbook. If Team USA’s probability of winning is 6.66 they might be at 9.50 on a German sportsbook.

If you bet on Team USA to win with the German sportsbook at odds of 9.50 and bet on Germany to win with the American sportsbook at odds of 1.80 and also back the draw you will be able to use arbitrage betting to guarantee yourself a profit no matter what happens. These could be the bets


Selection Odds Potential loss (stake) Potential win
USA 9.50 100 mBTC 850 mBTC
Germany 1.80 500 mBTC 400 mBTC
Draw 4.10 200 mBTC 620 mBTC

These are your possible results

Selection If USA win If Germany win If Draw
USA 850 mBTC -100 mBTC -100 mBTC
Germany -500 mBTC 400 mBTC -500 mBTC
Draw -200 mBTC -200 mBTC 620 mBTC
 Net result  150 mBTC  100 mBTC  200 mBTC

If you can get yourself into this situation put your feet up and pat yourself on the back, you are in bettors’ paradise! Yes there are people who do this for a living!

In order for this to be possible you need the combined probability that the odds represent to equal less than 100%. You can easily check that by putting odds from different sportsbooks into our overround and probability calculator.

Our odds comparisons have a function to detect arbitrage opportunities and send you arbitrage alerts.

Risks

The potential banana skins are that different sportsbooks have different rules for settling bets under special circumstances, like a game being postponed. If you end up with your bets standing at one sportsbook and being refunded at another you will not have guaranteed profit.

Also if one of the bets was at an obviously “incorrect” price due to human error from the sportsbook the bet will be refunded and you will not have guaranteed profit. Sportsbooks are covered for this in their terms and conditions.

In this case you can either let your other bets ride and hope you get lucky or replace the canceled bet with a bet on the same selection but at lower odds. That will likely guarantee a small loss no matter the result.

Trading

Odds can change a great deal in the lead up to a sporting event. This could be due to change in weather or a key player being ruled out due to injury. Odds will change even more during the course of a match.

If you can predict these price changes you can take advantage of them and guarantee yourself a profit no matter what the eventual outcome of the event.

The best platforms to trade and hedge on are Sportsbet (review) and Cloudbet (review) because they have the most games available for live in play betting.

Let’s say in a FIFA World Cup “draw no bet” market Brazil score the first goal, the price for Mexico goes out to 6.00 and you back them for a stake of 100 mBTC. Then Mexico scores a goal which brings Brazil’s odds to 1.36 now you back them for a stake of 412 mBTC.

These are your bets and possible results


Selection Odds Stake If Mexico win If Mexico lose
Mexico 6.00 100 mBTC 500 mBTC -100 mBTC
Brazil 1.36 412 mBTC -412 mBTC 148 mBTC
Net Result 88mBTC 48mBTC

Risks

Trading is only a guaranteed way to make profit if you can predict the direction of the odds price change and for live in play betting that means predicting how the game will go.

In the above example if Brazil maintained their initial 1 goal lead their odds would not have risen and you would not have been able to lock in a profit. However you would still have been able to reduce your liability by hedging.

Hedging

Hedging is when you make a bet then bet back against yourself to eliminate or reduce the amount you might lose.

Reduce your loss

Let’s say in the above FIFA World Cup “draw no bet” example you put your 100 mBTC bet on Mexico at odds of 6.00 but then they didn’t make a comeback, their odds got higher and you no longer thought they could win which means you will lose 100 mBTC.

You can no longer guarantee a profit but you can minimize the loss. The odds on Brazil are down to 1.15 so you back them for a stake of 550 mBTC. Your bets and your possible results are.


Selection Odds Stake If Mexico win If Mexico lose
Mexico 6.00 100 mBTC 500 mBTC -100 mBTC
Brazil 1.1 550 mBTC -550 mBTC 55 mBTC
Net Result -50 mBTC -45 mBTC

You are now going to lose no matter what happens but the most you can lose is 45 mBTC whereas without hedging you were going to lose 100 mBTC.

Guarantee break even or win

A more positive hedging experience is making a risk free bet; whereby if the outcome goes your way you win but if the outcome goes against you you break even.

You might think that a soccer match will not be a draw so you back no draw before the start of the game for a stake of 1oo mBTC at odds of 1.80.

To your delight the favorite scores 2 goals in the first half making the draw very unlikely so the odds of a draw drift out to 10.

Now you want to back the draw but just enough to cover your risk from the initial no draw bet. It’s a stake of 11 mBTC and your bets are


Selection Odds Stake If Draw If not Draw
No draw 1.8 100 mBTC -100 mBTC 80 mBTC
Draw 10 11 mBTC 100 mBTC -11 mBTC
Net Result 0.0 mBTC 69 mBTC

You could have backed the draw for more and guaranteed yourself the same profit no matter what the outcome but you still think the game will not be a draw and if you are right you will win more this way.

Most people would have let the original bet stand on its own and gamble losing 100 mBTC for the chance to win 80 mBTC rather than 69 mBTC. They are usually correct because usually you lose value by making that second bet due to the fact that the odds will include the sportsbooks overround.

However the the hedging bet is a safe play. The original bet will still lose about 1 in 10 times and no one ever went broke by locking in profit.

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2 Comments

  1. brandon white 3 years ago

    How come im not breaking even on a draw? What am i doing wrong? If i bet money on a draw too and its not i lose.

    • Author
      James Canning 3 years ago

      Hi Brandon, that means the odds must be too low to arbitrage or you bet the wrong amounts.

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