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Types of arbs

Sure bets can be divided into two groups: normal sure bets and back & lay sure bets.

Normal arbs

Normal sports arbitrages are those where betting in favour of each of the different outcomes of an event results in profits.

To understand sports arbitrages, let's see a couple of examples:

Tennis betting: tennis match between Player 1 and Player 2

                                 Bookmaker1                      Bookmaker2

Player 1:
Player 2:
           1,50                                   3,00
           3,00                                   1,50

Since it's a tennis match, it cannot end in a draw. If we find two bookmakers who offer these odds, we will win for sure.

Bet 1 $ in favour of Player 1 at Bookmaker2.
Bet 1 $ in favour of Player 2 at Bookmaker1.

Total investment: 2 $.
Total returns: 3 $.

In this example we have a net profit of 50%. A normal sports arbitrage usually gives a profit around 1 to 5%. The currency used is not relevant, as long as it is the same used in all the bets.

Let's see a more realistic example: tennis betting between Player 1 and Player 2

                                 Bookmaker1                      Bookmaker2

Player 1:
Player 2:
           1,72                                   1,50
           2,10                                   2,55

Bet 58.14 $ in favour of Player 1 at Bookmaker1. Bet 39.22 $ in favour of Player 2 at Bookmaker2.

Total investment: 97,36 $.
Total returns: 100 $.

In this case we get 2.64$ no matter who wins. In other words, 2.72% of our investment.

Back & Lay arbs

To understand Back and Lay Surebets we'll introduce another concept: the Exchange.

Exchanges are a type of bookmakers. The difference lies in that instead of betting against the bookmakers, you're betting against other people. Therefore, an Exchange is merely the platform through which two people make a wager, at the price of a small commission on the winner's prize (the loser sees no added charge). This commission is usually between 1% and 5% of the winnings.

This works the following way: on each bet, players can put a wager in favour (Back) or against (Lay) each of the outcomes.

An imaginary example: canadian football betting between Team 1 and Team 2

Mike thinks that Team 1 will beat Team 2, and that paying at 3$ is a good odd. He bets in favour of Team 1.

John thinks that Team 2 will be the winner and is willing to pay 3$ for every one that is put forth. He bets against Player 1.

Both of them bet 10$. What will happen?

If Team 1 wins, Mike will get 30$ so he will have won 20$ (to be paid by John).
If Team 1 DOESN'T win, John will win the 10$ wager (paid by Mike).

It's important to note that it isn't the same for a team to lose than for his opponent to win. In tennis, for example, it is because victory is the only possible outcome. In other sports, however, a draw is possible so it is not the same for a team not to win (draw or lose) and for the other to win.

So what's a Back & Lay arb?

Back is betting for, and Lay is betting against. Therefore, if we bet in favour of something happening and also bet against it, we will win at least one of the wagers (always with different bookmakers). If the bookmakers allow it, we can get a safe profit using the correct investment. This happens when the Lay odds are lower than the Back odds.

The complexity of this type of sure bet lies in understanding the Lay bet. Once understood, however, it becomes easier since, as with normal arbs where a draw is impossible, only two bets are necessary to complete the sports arbitrage.

To understand Lay stakes, it's important to point out that losing this type of bet doesn't mean the loss of the amount invested, but it means the loss of the risk. The risk of a bet is the amount you can actually lose if you lose the stake. Using the decimal system, risk = investment * (odd - 1).

To understand the risk of a Lay bet ask yourself the following question: What do I win in this bet? What you'll win with a Back bet is what the player who places the Lay bet will lose.

Let's see a couple of examples. The first shows the risk of a Back & Lay bet, whereas the second is and imaginary example of a Back Lay bet.

Risk examples of a 100$ stake in a Lay bet

Odd: 1.10       Risk: 10 $
Odd: 1.50       Risk: 50 $
Odd: 2.00       Risk: 100 $
Odd: 3.10       Risk: 210 $
Odd: 5.00       Risk: 400 $

Imaginary example of a Back & Lay Sure Bet (no commissions): Manchester United vs Arsenal

                                  Bookmaker                               Exchange


           2,10                                    2,40 - 2,50
           2,90                                    3,10 - 3,20
           4,00                                    3,40 - 3,50

An Exchange is offering an odd of 3.50$ against Arsenal winning. There fore we have an odd of 4.00$ in favour, and one of 3.50$ against.

We bet 100 $ for Arsenal (Back).
We bet 114 $ against Arsenal (Lay).

What will happen?

Arsenal wins:
Arsenal loses:

  + 300 $ (Back),    - 285 $ (Lay): +15 $.
   - 100 $ (Back),   + 114 $ (Lay): +14 $.

In this soccer betting example, if Arsenal win, we get a 15$ profit, and a 14$ gain if they lose.