Arbitrage Betting: Risk Free Riches Or A Mirage?

Jack Andrews
arbitrage
betting strategy
October 13, 2021

arbitrage betting mirage
Many sports bettors believe that arbitrage is a holy grail of sports betting where you have both reduced risk and guaranteed profit. However, arbitrage is not all that it seems. In fact, many bettors are sacrificing profit in a misguided attempt to reduce variance. In this article, we’ll explore the different types of arbitrage betting and why you shouldn’t fall for the arbitrage mirage.

 

Finding Arbitrage Betting Situations

When it comes to reducing variance in your betting there are three main tools: arbitrage, middling, and hedging. All three are similar, but distinctly different. In this article we talk about arbitrage. I’ll touch upon the other two techniques in future articles. Within arbitrage there are two classifications for sports betting:

  • Same Time Arbitrage
  • Price Movement Arbitrage

Same Time Arbitrage is when you have two sportsbooks offering opposing prices on an event and it creates an overlay for the player. This is what most people think of when they think of arbitrage. 

Over +145
Under -139

In the brave new world of highly competitive and somewhat incompetent sportsbooks, a lot of arbitrage opportunities pop up daily. Rarely in major event markets, but frequently in derivative markets. Hey, who doesn’t like guaranteed profits with no risk? 

I’ll tell you who – me. I’m not a fan of Same Time Arbitrage. My biggest problem with it is you are almost always betting one +EV wager and one -EV wager. The true price is rarely in the middle of the two lines. Even when it is, there is usually one side that offers more of an edge than the other side. It could be argued that if you don’t know which side is the sharp side you should bet both sides. My response is that it doesn’t take a lot of inspection to find the sharp or weak side. 

 

Determine The Weak Side Of Arbitrage

The first thing you can do to free yourself from falling for the arbitrage mirage is to figure out which line is sharp and which line is weak. An easy way to determine that is to take a look at the rest of the market. If your survey of prices shows most of the market in step with one side while the other side is an outlier, you can probably assume the outlier is the weaker price. It may be stale or it may be a mistake.

You can also use the reputation of the sportsbook as an indication of whether they are sharp or weak. A sportsbook like Pinnacle, Circa, or BetCRIS is known for being very sharp in how they deal their lines. Whereas a sportsbook like BetMGM or BetRivers has a reputation for struggling to keep ahead of their own mistakes. In the future, Unabated will feature an odds screen that highlights market makers and sharp books. Knowing the sharp book opinion can be used as a guide to illuminate the shortcomings of the weaker books. 

This leads to the second biggest problem with betting this type of arbitrage. The +EV side is almost always a weak sportsbook, while the -EV side is almost always a sharp sportsbook. Over time, you’ll find you win consistently at the weak book and lose consistently at the sharp book. 

There are plenty of services out there that want to point you to Same Time Arbitrage and to lure you in, they show you account balances and withdrawals with eye-popping numbers. However, if you look further, those withdrawals are all coming out of soft recreational sportsbooks. Those recreational books all have one thing in common when it comes to dealing with winning action. They limit your account to pitiful amounts. It’s simply how a weak sportsbook makes up for the fact that they are weak.

arbitrage betting pennies steamrollerIn the end, you don’t get a lot of profit for your time at the weak sportsbook because you gave back 95% of the profit to the sharp book where you’ve been a consistent loser due to arbitrage. Wouldn’t it be better to just keep 100% of the profits at the weak sportsbook if you know they are weak and limiting is almost inevitable? 

Additionally, Same Time Arbitrage generally occurs in more obscure betting markets where your action might stick out. These markets are almost always going to draw attention from risk management because they have much lower liquidity. I liken Same Time Arbitrage to picking up pennies in front of a steamroller. It’s just not worth your time and effort for the minimal profit and the impending downside. 

 

Knowing When To Buy Back On Betting Line Movement

Meanwhile, Price Movement Arbitrage comes from when you bet a line and it moves in your favor. There is a natural tendency to want to buy back the other side and either shoot for the middle or reduce your risk. Spanky has made this approach romantic and many try to emulate him in their approach to betting. Wait, did I just use Spanky and romantic in the same sentence? 

At least with Price Movement Arbitrage the sharp book/weak book dichotomy doesn’t come into play. It is just a function of market movement. That movement could be due to news or just steam action on a particular side. However, the fact remains that you have an initial healthy amount of EV and you are sacrificing some of that EV in exchange for some certainty in your outcome. 

Here’s why I’m not a fan of Price Movement Arbitrage either. Most people who are practicing this type of arbitrage did not know the line was going to move in their favor. That’s what is different from you and Spanky. He has many different tools at his disposal which allow him to get ahead of line moves and know the optimal time to buy back. Sometimes he even sets up the market to move exactly how he wants it to move. Most readers of this article do not have that market knowledge or power.

Instead they got lucky with a line moving in their favor and now want to try to win two bets instead of one. Problem is there is a lot that goes into setting up a middle opportunity beyond just having a viable window where you scoop. 

 

Using Unabated To Assess Arbitrage Betting Value

If you find yourself faced with the temptation to buy back against an earlier position, you should take into consideration both the EV and the risk of each bet. Fortunately, Unabated has a tool which helps you visualize the EV of the two wagers. It is our Closing Line Value Calculator. Here’s a quick example to drive home this point.

In the NFL, you bet MIN -7.5 -110 v. DET. The line moves to -10 on game day. Is it worth it to shoot for winning both bets with a Vikings victory of 8 or 9? Well, first, you should know that a game landing on a margin of 8 or 9 is pretty low probability. However, let’s look at the value you have in each of those bets.

You can enter your initial bet of -7.5 -110 in the calculator along with the projected vig-free closing line of -10 +100 (we use vig-free because that is the relatively true price of the probability of MIN winning). 

Unabated CLV Calculator Example

Next we take the proposed bet on DET +10 -110, again we use the vig-free price of the projected closing line (+10 +100).

Unabated CLV Calculator Vig

Not unexpectedly, we get -4.55%, which is the house edge you face when betting something at -110 when the true odds are +100. So you have one bet which is +6.81% and one bet that is -4.55%. Do you still feel like you should shoot for that middle? 

However, what if you do have a situation where both lines have some value. You passed the EV test. It is time to analyze your risk in the situation. Analyzing the risk is a bit more qualitative. Ask yourself “Did I bet more on the original bet than I can afford to lose?” If the answer is affirmative, were you expecting the line to move this way? If so, then there may be reason to take advantage of Price Movement Arbitrage.

Conversely, if you answered no, there’s less incentive to pursue the arbitrage. In fact, you may want to re-evaluate the fundamentals of what put you in this position. Over-betting and misreading the market are disciplines that need to be mastered to become a sharper bettor.

 

Key Takeaways

  • Arbitrage is not always as good as it appears to be.
  • Your lifespan at a weak sportsbook is generally limited.
  • Arbitrage eats into your profits by redistributing some of them to the risk counterparty.
  • Price Movement Arbitrage is difficult to pull off profitably – but possible.
  • Stick with the +EV side of the bet. Don’t fall for the arbitrage mirage.