September 18th 2002 - issue 17

1. An alternative to arbitrage

The safest way of making guaranteed profits from betting is by arbitrage. Most of you will know what this means, but for the rest of you, it is taking advantage of imperfections in the market which enable you to back on one site at longer odds than you lay the same bet on another site, the difference between the odds giving you a risk free potential profit. (You do of course have to be aware of the commission on the site where you won the bet, as this could easily turn your certain profit into a certain loss.) The trouble with arbitrage is that it may be safe but it can also be a hard slog. The returns are normally very small unless your stakes are enormous, but worse is the endless hours you can spend going from site to site looking for these opportunities. Finally, as the public wake up to the realisation that risk free betting is a reality, competition is increasing, these opportunities are getting quickly snapped up, making it harder still.

As an alternative to arbitrage, you could try what I call working the margins. Take the example of a market where the odds are 4.0 to back or 5.0 to lay. If it is you that is offering these odds and you get opponents to accept both sides of the bet to a value of £100, you stand to win £100 if the selection succeeds and break even if the selection fails. As this entire transaction is done on one site, you have the advantage of only paying commission on profits, which can make a big difference compared with arbitrage. This is how it would work:

Outcome succeeds:

Back £100 at 5.0 winnings = £400

Lay £100 at 4.0 loss = -£300

Profit = £100 - 5% commission = £95

Outcome fails:

Back £100 at 5.0 loss = £100

Lay £100 at 4.0 winnings = -£100

Profit = breakeven with no commission payable

2. The early bird gets the worm...

Once the market has settled down, it becomes far more difficult to successfully work this technique. As an example take the recent England v Portugal friendly. In the mature market the price for an England victory was 2.25 to back or 2.3 to lay. However, much earlier in the betting an astute layer managed to get a £400 bet matched at 1.84. If he then backed the same outcome 2.3, he was looking at a potential risk free profit of £138. As it happens, England drew resulting in break even for this scenario, but I'm sure you get the point.

The information section on for each betting market features a graph which shows you when bets at certain odds were matched. It is often the case that the very high or very low bets were amongst the first bets matched, therefore you need to be offering odds at the start to optimise this technique.

When you offer odds you are effectively putting your head on the block. If you get your odds wrong, those which offer the greatest value will be accepted whilst the others may be ignored, leaving you in a vulnerable position. These risks could be even greater if you are the first person to be offering odds as you have no reference point against which to measure the odds you are offering. To ensure you set your odds at an appropriate level, and to maximise your opportunities in this respect there are three sources of information I recommend you use:

2.1. Research

Odds should reflect the % likelihood of a particular outcome. If a bet is priced at 2.0, that is equivalent to evens, and as such should have a likelihood of 50%. So what creates this likelihood? It is a combination of all available information that is likely to affect the outcome. The sort of information which may affect the odds in a football match would be the two teams records at home and away, their records against each other, their current form, injuries or performances of key players. The list goes on, but most, if not all of this information is available on the internet, if you know where to look. You may collate all of this information into a statistical likelihood which you can then convert into a price. If this price was 5.0, then you may offer to back at 6.0 or to lay at 4.0.

2.2. Create your own odds archive

If you were able to predict where the odds for a certain event were likely to end up, then you would be at a great advantage in setting early odds at a level which minimises your risk. By creating an archive of past odds, and making a study of them, you should be able to get a very good feel for where odds are likely to end up, especially if you combine this with good quality research as discussed above.

Past odds for Premiership win/draw/lose bets as offered on ww.sportingbet.com are available on www.football-data.co.uk I am currently unaware of any sites which offers odds archives on any other sports, or for odds offered on the bookie free sites. (If you know of one, or if you offer such a service yourself, please let me know.) Therefore, if you want this information, you need to gather it yourself, by visiting the site shortly before the kick off and collecting the information.

Note: An interesting alternative possibility if you build up a substantial odds archive would be to use it to run a "what if?" scenario. What if you had backed every match to finish in a 0-0 draw. Would the profits from the matches which did finish 0-0 outweigh the losses from those which didn't? Whilst this is no guarantee of future profits, if you can find an outcome which the market tends to undervalue, you may be able to put this information to profitable use.

2.3. A record of matched bets

Whilst the odds which are offer are useful, if you had a record of the odds at which bets were actually matched, this would be better still. This info is available to be collected from most sites. On Betfair, for example, if you click on the i prompt next to your choice of outcome, it will display the value of bets matched at every odds level. There can be a surprisingly large spread between the highest and the lowest odds at which bets were matched, which gives you an idea of how this technique is put to profitable use by astute bookie free betters.

This information is in table format which can either be printed, or saved onto Excel. This is much more time consuming than collecting the odds for the whole market, because you have to enter each possible outcome one at a time. Although you have the opportunity to gather this information after the match has started, normally until the end of the match, there still isn't enough time to collect data on all markets, therefore, unless you are a technical whiz and can find a way of automating the process, you will have to specialise:

3. Where to specialise?

The area in which you choose to specialise should ideally fulfil the following criteria:

1. Choose something on which there is rarely a consensus of opinion. The wider the range of opinion, the greater the range between odds backed and laid.

2. Choose a market on which significant sums are gambled. As some teams attract much greater interest than others it may be worth specialising on their matches alone.

3. Choose a market with plenty of betting opportunities. If you focus on one of the Premiership markets, eg 1-1 draws, that gives you nearly four hundred profit opportunities a year. On the other hand, if you cannot cope with so much, then you could select one of the markets which are exclusive to live TV matches only, such as corners.

The number of markets you are going to cover will depend on how much time you have to invest in your bookie free activities. It will also depend on the size of your bank (see below). Be honest with yourself, and don't spread yourself too thinly. For example you may choose to focus on the correct scores market. However, if your time is more limited, you might narrow it down to just 1-1 draws. If you can't manage that you may for example chose to focus purely on those matches where two of the top six teams are playing each other. The possibilities are endless but your objective should be to choose, one or more markets in which you can become an absolute expert. Don't settle for being a jack of all trades, be a master of one, that way you can be confident that your level of expertise is likely to be as good, if not better than your opponents.

4. Managing the negatives

There are risks attached to this type of betting, but so long as you do your homework and manage them appropriately, they can be minimised. As stated above when you are the person offering the odds, there is a high chance that one side of the bet will be accepted and not the other. What should you do then?

Firstly there should be an adequate buffer between the back and lay odds for you to cope with this. Taking the previous example where you calculate the likelihood of an event to be 5.0. Say you then offer to back at 6.0 and lay at 4.0. The 4.0 is accepted but the 6.0 is not because the market has moved leaving your bet behind. The market has actually settled at 4.4 back 4.6 lay. In this case you have nothing to worry about, you can back at 4.4 still giving you a potential profit of 0.4 x your stake. This is not as much as you would have liked but it is still a profit nevertheless.

The problem would occur when rather than settling at 4.4/4.6 the market settles at a much lower 3.4/3.6. Your risk free potential profit has now become a no win, best case scenario break even. This is the downside, and the potential risk. However, if your research and interpretation of your odds archive is half reasonable you won't often get it so badly wrong. When you do find yourself in this situation, the sensible route is to hold your hands up and take the loss and to recheck your research and information to try to establish what went wrong, so the lessons can be learnt for next time.

On the odd occasion you may find yourself with an exposure in a market where there is no activity at all, leaving you with a potential liability that you are not able to reverse out of. The only protection against this is to try to avoid it by specialising in a market which always attracts sufficient activity to make this a very unlikely scenario. Another possibility that cannot be completely discounted is the site going down at a crucial time, again leaving you with potential losses that you are unable to balance out. You could of course run with it, relying on the fact that your research has shown you to have a statistical advantage, but this reduces you to the status of a gambler, which may be unacceptable to you if your exposure is high. One way around both these potential problems would be to only focus on markets which are available on more than one site which would give you a safety net in the event of your main site failing. This has the disadvantage of restricting your choice of markets, but if you are employing a minimum risk strategy it will offer you a degree of protection.

The other reason that this technique may not be for everyone is the cost of financing the bet in the first place. If you offered to lay an outcome to £50 at odds of 10.0 then you would need a bank of £450 to support your potential losses (the site cannot take into consideration the fact that you are going to subsequently bet the opposite). Multiply that by eight matches and you are up to a required bank of £3,600. If you are betting on a market with a variety of potential outcomes you could lay more than one without having to increase your exposure because you only have to finance your worst case scenario in each market. But if you are betting on a variety of markets you will need to have sufficient funds to cover each of them.

One way around this would be to start off by only offering to back an outcome, which would in the above scenario only require a bank of £50 per market. If that bet is accepted, then you will be able to offer to lay it, because your potential losses will be covered by the winnings you will get if the selection wins. However, by the time this has happened, you could well have lost your early bird advantage. You also stand less chance of your bet being matched because there are more backers than layers on these sites.

If you are limited by the size of your bank, you will be better off specialising in a market where the odds are much shorter, for the obvious reason that you will need a smaller bank to finance the potential losses from laying a bet at 3.0 than 10.0.

5. Conclusion

I have gone into the worst case scenarios here so that you go into this with your eyes open. However, if your research is good and you are offering back and lay odds with sufficient margins, such slip ups should be rare and inexpensive compared with the potential rewards when you get it right. Whilst this bookie free technique is not completely risk free, if you put in your homework and maintain your discipline at all times, you will be hard pressed to find a better way of putting these sites to profitable use.