Lesson # 4

Notice also that the arbitraging profit is cumulative in that the overall profit is the sum of the arbitraging profits made on the three individual horses concerned.

So, no matter what the race outcome is, no matter who wins the race, a maximum of £35 and a minimum of £15 will be won.

Two hours before the start of the race, you receive a phone call from the friend that you received the e-mail from.  He tells you that he has received a tip from a stable lad at another yard that a horse called ‘Getting Better’ will win the race in which Purple Patch, Bank Balance and Arbit are are also running.  When Getting Better last ran, his performance was well below par.  Hence, the horses’s current odds of 12.0.  A visit from the vet, following the race, revealed that the horse was suffering from a virus.  Getting Better is now completely virus-free and has been putting in some stunning performances on the gallops lately.  This information is known to few people.  Hence, the horse’s odds.

From this latest information you conclude that Getting Better’s odds will fall dramatically when the latest information begins to circulate and that the odds on Purple Patch, the current favourite, will increase.

You therefore place the following bets on a betting exchange:

Bet 7.  £5 win bet on Getting Better at odds of 12.0.
Bet 8.  £10 lay bet on Purple Patch at odds of 3.0.

It is now 1 hour before the race begins.  The odds on Getting Better have dropped to 2.0 and the odds on Purple Patch have increased to 6.0.  You therefore place the following bets on a betting exchange:
Bet 9.  £10 lay bet on Getting Better at odds of 2.0.
Bet 10.  £5 win bet on Purple Patch at odds of 6.0.

Now let’s look at the net effect of the latest four bets and the profit made on each of the two horses:

Now let’s look at the overall affect of the 10 bets.  Again, the amount of profit that is made depends upon which horse wins the race.  As before, this is best expressed in the form of a table:

Notice again that the arbitraging profit is cumulative in that the overall profit is the sum of the arbitraging profits made on the individual horses concerned.

So, no matter what the race outcome is, a maximum of £60 and a minimum of £20 will be won.

When should I place my bets?

This is not a particularly easy question to answer since odds are continually changing.  The odds of some horses will continue to drift out from the point that the market opens to the point when the race begins.  Some horse’s odds do the opposite. They continue to shorten.  The movement of the odds on some horses resembles that of a yoyo - up and down all day.  Therefore, there is no right or wrong time to place your bets.  If bets are placed early, the odds may decrease afterwards.  This means that the liability on lay bets could have been decreased had the bet been placed later.  On the other hand, the odds may increase which would mean increased liability on lay bets.  It was just as well, therefore, that the bets were placed early.  At this time, we are not aware of any reliable method which accurately predicts the movement of a horse’s odds.

There is, however, a rule of thumb which can be used when arbitraging bets:  Determine how much arbitrage profit on a given horse you require.  Place the initial bet as soon after the market on the race opens.  Leave the placing of the arbitraging (second) bet until as late as possible.  Sometimes, placing the second bet whilst the race is being run can often pay handsome dividends.  This ensures that the maximum time is made available in which to arbitrage bets.  Also, bets should be arbitraged when the odds on the selected horse(s) have increased to the point where the arbitrage profit requirements have been satisfied, rather than waiting for the odds to increase, or decrease, still further.  That way, the profit is secure.

A point worth noting is that the odds required may exist on the exchange for a few seconds only and may disappear as quickly as they appeared.  To avoid the disappointment of missing the required odds, it is advised that the second bet is created shortly after the first bet has been matched on the betting exchange.  The second bet should contain the stake and the odds required.  The bet should then be submitted and will remain on the exchange in an unmatched state until such time as the required odds become available.  If they do, the bet will be matched and the required arbitrage profit will have been secured.  Be aware, however, that if a horse, running in the same race, is withdrawn at any time following the placing of the second (unmatched) bet, or the second bet has not been matched by the start of the race, the bet will be cancelled by the betting exchange.  If this happens, simply regenerate the bet and place it on the system to await matching.  The method of placing an unmatched bet on the system to await matching means that you are not required to sit in front of a computer screen for hours on end waiting for the required odds to become available.

Bookmakers and Betting Exchanges

As has now become apparent, arbitraging involves the placing of a win bet and a lay bet on the same horse.  The high street bookmakers do not allow members of the public to place a lay bet on a horse.  As a result, you must place your lay bet on one of the betting exchanges.  The win bet, however, can be placed either on one of the betting exchanges or with one of the high street bookmakers. The bet can even be placed with a high street bookmaker over the internet, or by phone, if required.  You could therefore sign onto a betting exchange using one internet session and sign onto a high street bookmaker using a second internet session and monitor the odds in both systems with a view to taking advantage of the odds differential between the two systems in order to arbitrage a bet. Open Several Bookmaker accounts to ensure you can always get the best odds available.

Commission and Betting Exchanges

Betting exchanges charge a commission on winning bets.  In the case of the Betfair betting exchange, the maximum commission charged on winning bets is 5% although this reduces in line with an increase in betting activity.

Therefore, when using a betting exchange, remember to include any commission levied on winning bets when considering arbitraging.

Arbitrage Calculations

For those who arbitrage their bets on a frequent basis and whose mental arithmetic is lightening fast, arbitrage calculations should not pose too many issues.  For the remainder of us mere mortals and for those who are new to arbitraging, a spread sheet is probably the best way to calculate arbitrage profits in advance of arbitraging bets.  To help you, we have created a spreadsheet to assist those would-be arbitragers amongst you.  Please have a look at them, understand them, play with them and use them in your arbitraging exploits.

Arbitrage Software

Arbitrage software is available for those who wish to concentrate on this aspect of horse racing.  However, it doesn’t do anything which can’t be performed manually.  The software just does it quicker, more efficiently and more effectively.