For a few minutes work on a single Saturday morning I earned enough profit to pay for a monthly subscription to this site
These real-life examples from a typical Saturday (9th March 2013) show how the arbitrage data can be used to generate healthy profits. They also try to show some of the thought processes involved in successful arbitrage. By coincidence they also highlight a further potential risk when using the arb data as a trading platform rather than taking the price immediately available.
There is also a school of thought that cross-references arbs to the tips and increases the stakes on a tip if it also becomes a good arb. Arbs usually happen because the Betfair price falls faster than the bookies cut the price and arbs are one indication of a fancied horse – simply because money is going on it and thus lowering the price. In the examples shown, it is pure coincidence that both winners were arbs, this is not always the case. If it was, then I would have retired long ago and this website would not exist 🙂
Example 1 – my morning coffee
Here is a screenshot of the arb data on Sat 9th May 2013. I usually sit down with my morning coffee to look at arbs before the bookies have changed their overnight prices. As you will see, there are a couple of arbs showing in the 17:15 race at Wolverhampton. This is always a good thing as it reduces the overall amount required to cover the lays on Betfair. SKYTRAIN is available at Stan James and NEWSTEAD ABBEY is available across 3 books. Click on the thumbnails to see the full sized screenshots and the prices
So we next need to look at what the liquidity is on Betfair to make sure that we can cover a reasonably large sized bet with the bookies. So here is a screenshot from Betfair which was taken a few seconds later. There are a couple of things to note
- There is £390 available at 2.58 on SKYTRAIN
- There is £420 available on NEWSTEAD ABBEY at 4.2
I tend to like to put round figures on at the bookie so a backing NEWSTEAD ABBEY for £100 at the 3 bookies shown seems sensible, but that requires only £325 of the available liquidity, so the strategy here is for 3x £125 bets at the bookies with a single lay at Betfair to a backer’s stake of Â£406.63. This requires funds in Betfair of £1,301.22 to cover the eventually that the horse wins and the lay has to be paid out so my total capital tied up on this bet is £1,676.22. The two possible results are:-
- NEWSTEAD ABBEY wins – I make a profit of £375*3.5 = £1,312.50 at the bookmakers and payout £1,301,22 on Betfair, yielding a profit of £11.28
- NEWSTEAD ABBEY loses – I lose £375 at the bookmakers and collect £406.63 less 5% commission = £386.29, yielding a profit of £11.29
So whatever the outcome I make at least £11.28 , but I have tied up a large sum until teatime. Even so, the return of £11.28 on the £1,676.22 used represents 0.67% in one day
Turning to SKYTRAIN NOW:
The £390 available on Betfair at 2.58 will cover approx £350 at the bookies, There is plenty available at 2.68, but after factoring in a 5% commission, 2.68 does not produce a profit, the limit being 2.66, so I bet £350 at the bookies at a price of 2.75 and lay to a backer’s stake of £380.43 at a price of 2.58. This requires £601.08 in covering funds, but since this is the same race as NEWSTEAD ABBEY and we already have covering funds in excess of this amount for this race, no extra capital is required on Betfair, just the £350 for the bookies. The two possible results are:-
- SKYTRAIN wins – I make a profit of £350*1.75 = £612.50 at the bookmakers and payout £601.08 on Betfair, yielding a profit of £11.42
- SKYTRAINÂ loses – I lose £350 at the bookmakers and collect £380.43 less 5% commission = £361.40, yielding a profit of £11.40
Therefore for the two selections, I am using £2,026.22 in total for a guaranteed profit of at least £22.68 – a yield of 1.12%
I have made a guaranteed profit of over twenty quid before I have even had my breakfast
Once I’ve had breakfast, I settle in for another session of arb spotting and very much like the look of the STRICTLY SILVER in the 14:55 at Wolverhampton. It is available at two bookies at 8.0 versus 6.2. a quick check on Betfair shows that there is £670 available, so I think I need to get on quickly before the bookies have a chance to cut the prices. I know from experience that at the price shown, both bookies will not accept more than £140 (to keep their liability to less than £1,000) so I quickly get the two bets on at the bookies.
Now the 2x£140 bets are on, I take a closer look at the market and decide not to lay at the 6.2 that is available at the time, but ask for 5.8. My reason is that having backed at 8.0, I could accept a lay at upto 7.6 and still make a small profit, I will need to keep an eye on the price in case it starts drifting, but I could also use various Betfair software suites to automatically trigger a stop-loss lay at 7.4.
So I have my unmatched lay set up at 5.8 for a backer’s stake of £389.57 requiring £1,869.94 tin Betfair to cover it. Patience pays off and eventually my lay is matched at 5.8 and I am very happy. Although I always think to myself “what if I had asked for even lower?”.
There is no right or wrong answer to this, but obviously, asking for lower prices increases the risks because the price might never drop to the level you ask for. Similarly, with unmatched lays, it is necessary to continually keep an eye on the market in case the selection starts to drift unless you are using software that can set up a triggered stop-loss bet AND cancel the unmatched lay. On the other hand, it does increase the profit to be made.
A reasonable approach (and one I often use) might be to split the difference i.e. lay off some of the bookies’ bets at the price available at the time to secure some profit and then risk a lower priced lay for greater profit knowing that you have some profit already locked in to play with. With the example given the spread between the back and lay bets was such that I was comfortable that I could always trade out and still make a profit.
The two possible outcomes for the race are:-
- STRICTLY SILVER WINS – I win £1,960 from the bookies and payout £1,869.94 on Betfair giving a profit of £90.06
- STRICTLY SILVER LOSES – – I lose £280 at the bookies and collect £389.57 less 5% commission = £370.09 at Betfair. Thus my profit is £90.07
So I can guarantee a profit of at least £90.07 on a total capital used of £2,149.94 a yield of 4.19%!!
Before lunch, I know I will be over £110 richer by teatime – guaranteed!!!!
These arbs made me £112.74 and required £4,176.16 in funds. So my overall return on the day was about 2.7% guaranteed with minimal risk. Using over £4,000 in this way might worry some people, but I would rather earn 2.7% in a single day than less than this in the bank or an ISA in a whole year. Plus it is ALL tax free.
You don’t find arbs as good as STRICTLY SILVER every day so it is important to capitalise on them at each and every opportunity.