Arbitrage Betting – Boxing Betting
For those interested in the mathematics of sports betting, what I am about to reveal to you can make you a ton of money. This is where my finance knowledge comes into play. In finance there is something called "arbitrage," which is usually associated with 2 words:
Usually, you have to take more risk in order to set yourself for more possible reward. Not with the strategies that follow. These truly are "riskless profits."
In many high profile fights the odds are established far in advance of the actual bout. For instance, on one particular online sportsbook, the odds for the Floyd Mayweather vs. Ricky Hatton bout opened at 4 to 1. As the fight drew closer, the odds narrowed to 2 to 1. This occurs because as the fight approaches, casual fans begin to bet and put pressure on the odds. Convergence doesn't happen all the time, but when it does, you can get a free bet on the underdog. This is a true arbitrage opportunity.
Let's take the Mayweather vs. Hatton bout as an example:
1) Bet $50 on Hatton (the underdog) when odds first come out at 4 to 1.
2) Bet $100 on Mayweather (the favorite) when the odds converge to 2 to 1.
If you followed these steps the worst you could have done is breakeven. It's impossible to lose money! Do you see why? If Hatton wins, you win $200 and lose the $100 you put on Mayweather. That's a net profit of $100. If Mayweather wins, you win $50 and lose the $50 you put on Hatton. That nets you $0. Essentially you got a FREE BET on the underdog. It's ALL upside. To make things better, you can adjust the bet sizes anyway you like, just make sure your bets are in the correct proportion to all them to cover each other.
You have to be careful though, because besides staying still, spreads can also widen. In these situations, you could be stuck with a bet on an underdog with no opportunity to make an offsetting bet.
It will help to understand why spreads converge at times. Bookies set odds the way that they think the market will bet the bout. Sportsbook odds are NOT based on what the bettors think, at least not at first. Unlike the stock market, where investors determine the prices, bookies determine odds. Therefore, it is an extremely rare situation where a bookie will get the odds precisely right. When people actually begin to place their bets, the bookie must adjust his odds in order to prevent taking on excessive risk. Since the majority of bettors tend to be casual fans, they will not place bets until the fight gets closer. Once fight week comes around, bettors arrive in force and begin to pressure the odds. This is where spreads begin to move and where we, as smart speculators, swoop in to take advantage.
There are numerous online sportsbook from which to place bets. Many times, each of these sportsbooks will have different odds for the same bout. Sometimes, the odds will even differ greatly. In addition, online sportsbooks will differ significantly from the Vegas odds. This is due to the fact that online bookies will tend exaggerate the odds in order to profit more from the spread. As smart speculators, we can take advantage of the differential. This situation is actually identical to the spread convergence situation discussed above except that in this case, we use different sportsbooks.
If you think about it though, the differing odds situation is a far better spot to be in than the spread convergence situation. This is because with spread convergence, you need to analyze how and when bettors will arrive and potentially pressure the odds. There is no guarantee that spreads will converge. However, if the odds are different enough across sportsbooks, you can make the same play as above and not have to wait until the possible convergence.
A current example of this is the Pacquiao vs. Oscar de la Hoya bout. Pacquiao opened as 3 to 1 underdog on Bodog. However, the odds in Vegas are only 1.5 to 1. Let's break this situation down:
1) Bet $50 on Pacquiao with Bodog.
2) Call a sportsbook in Vegas and bet $150 on De la Hoya.
If Pacquiao wins, you get $150 and lose $150 on the De la Hoya bet, netting $0. If De la Hoya wins, you get $100 and lose $50 on the Pacquiao bet. This nets you $50. Again, it’s impossible to lose if you bet in these proportions. The worst you can do is break even. Remember, you can adjust the bet proportions to your liking, just make sure they at least offset each other.
Want to get a better grasp on the mathematics of sports arbitrage? Check out these primers: