I and an arbitrage colleague recently presented a seminar held in Coventry organised in conjunction with Darren Power. As a follow up to this I have been asked if I would write a series of articles in an attempt to unmask the vagaries and opportunities of the arbing world.
Arbitrage is a principle where we take advantage of price differentials between two or more markets. We place a combination of bets to capitalise on this imbalance and make a profit. Whatever the outcome, we do not lose. We may on occasions only break even, but generally a small and steady profit is made. In principle arbitrage is risk free!!
For example: if we bet on an event where there are only two possible outcomes, in this case the toss of a coin.
The true odds are 2.00 heads and 2.00 tails so a decent bookie may offer 1.91 on either option. Let us suppose a particular bookie offered 5.00 on Heads, not likely I know but this is just an example remember. What would I do assuming I could get 1.91 on Tails?
Betting heads at 5.00 consistently for a large number of tosses of the coin would (or should) result in some serious profit, but what if this was a one off event? Why take a chance on it being tails? At the odds available you can back both options by splitting your stake so that you win either way. For example:
£20.00 @ 5.00 on heads would give you a return of £100.00
£52.36 @ 1.91 on tails would give you a return of £100.00
So, whatever the outcome you would make a guaranteed profit of £27.64
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