Are you considering using betting arbitrage to mitigate the risk of placing wagers? If so, do you know how to take advantage of bonuses and promotions to leverage betting success when using the arbitrage betting vehicle? Have you signed up with more than one sportsbook? Or, are you still at the stage where you are researching the viability of arbitrage betting?
The uninitiated might also be wondering what arbitrage betting is. And, how it functions to reduce the risk of losing any money while placing bets. Therefore, let’s consider the concept of arbitrage and how to leverage this betting style to profit from placing wagers on sports matches.
Defining the concept of arbitrage
The concept of financial arbitrage is defined as both the simultaneous purchase and sale of a financial market asset to "profit from a difference in the asset’s price between markets." And its primary function is to exploit the difference in the same financial instruments that are published in different markets or exist in different forms on more than one market.
It’s worth noting that if the financial markets were perfectly efficient, arbitrage would not exist. However, it exists and can be leveraged to make a profit. Let’s look at a brief example:
Let’s assume that Company A is trading on the London Stock Exchange at £10 per share. Additionally, you notice the same shares trading on the Frankfurt Stock Exchange at £10.50 per share. Therefore, you can buy shares at £10 on the one stock exchange and sell them at £10.50 on the second stock exchange. You can continue to buy and sell shares in the same manner until either the London Stock Exchange runs out of shares to sell, the price increases because of the increase in demand, or the stock exchanges adjust their prices.
Another example of using arbitrage to profit from financial market trading is the use of Contracts for Difference (CFDs) to trade on the price movements of different FOREX currency pairs. When using the CFD vehicle to trade Foreign Exchange Currencies, you do not buy the underlying currencies, you take out a contract between yourself and the brokerage, stating whether you believe the price of a currency pair such as the USD/GBP will increase or decrease within a specific timeframe.
In order to leverage the arbitrage vehicle in this scenario, you will need to take out two CFDs on the same currency pair; one that says that the price of the GBP will increase against the USD and another contract that states that the price of the GBP will decrease against the USD.
For example, if you take out a CFD on the USD/GBP currency pair that states that the GBP will rise against the USD for £100. If the price increases by £0.02 per GBP, your total payout will be £200. But what happens if the price of the GBP drops against the USD?
If the price of the GBP drops by £0.02 per GBP, you could lose £200 instead of increasing your trading income by £200. Therefore, the way to prevent the £200 loss is to take out another CFD of £100 stating that the GBP’s price will drop. And, you set a stop loss point at £100 to make sure that you don’t lose more than £100.
Let’s assume that the outcome of this trade is as follows:
The price of the GBP increases by £0.02 per GBP. The first CFD makes £200 and the second CFD loses £100. Therefore, your total profit from these transactions is £100.
Leveraging promos and bonuses when using arbitrage betting as a profitably tool
Now that we understand the concept of financial arbitrage, let’s consider a simple scenario of how it is applies to profitable betting, no matter the outcome of the game.
At this juncture, the question that begs is, what do bonus codes like the Bwin bonus code have to do with arbitrage betting?
The straightforward answer is that, in order to profit from arbitrage betting, you need to open a sports betting account with more than one sportsbook. And, because all sportsbooks offer welcome or sign-up bonuses to new clients, you can take advantage of these bonuses to increase your bankroll before you set up the arbitrage scenario. There are also times where a particular sportsbook will offer a promotion on the sports match that you intend wagering on. So, depending on the promo’s terms and conditions, it is an opportunity to profit from both the promo and the arbitrage betting opportunity.
Let’s assume you are interested in betting on a tennis match between Roger Federer and Andy Murry. And, you’ve noticed that the two sportsbooks you have signed up with are offering different odds on the same match. In decimal odds, these number are:
Federer: 1.25 – implied probability of 80% chance of winning the match.
Murray: 3.9 – a probability of 26% chance of winning the match.
Murray: 1.43 – 70% chance of winning the match
Federer: 2.85 – 35% chance of winning the match
Looking at these odds, Sportsbook 1 considers Federer the favourite to win at 1.25. The pay-out for these odds is £1.25 for every £1 wagered. Because this sportsbook has determined that Murray only a 26% chance of winning the match, the payout will be £3.90 for every £1 wagered.
Sportsbook 2, on the other hand, has swapped the favourites around. According to these odds, Murray has a 70% chance of winning the match and a probable payout of £1.43 for every £1 wagered. Federer has a 35% chance of winning the match with a potential payout of £2.85 for every £1 wagered.
To ensure that you profit from the wager no matter who wins, you place £100 on Federer to win with Sportsbook 1 and a £100 wager on Murray to win with Sportsbook 2.
It must be emphasized that this is a very simple example. It is merely designed to demonstrate the principle of successful wagering utilizing arbitrage betting to ensure that betting success irrespective of the match’s outcome.