🔢Arbitrage Mathematical Example

Let's consider a mathematical example:

Let's say Team A has odds of -120 on Sportsbook 1 and Team B has odds of +150 on Sportsbook 2

Step 1: Understanding the Odds

• Odds of -120 for Team A mean you would need to bet $120 to win $100.

• Odds of +150 for Team B mean you'd win $150 for every $100 you bet.

Step 2: Initial Bet

Let's say you initially bet $600 on Team A at -120 odds. The initial bet amount can be anything but in general the larger the sum the larger the profit.

To find the potential winnings, you use the formula: (100 / |Odds|) * Bet Amount

In this case, (100 / 120) * $600 = $500

Step 3: Total Possible Return

If Team A wins, you get your initial bet back ($600) plus your winnings ($500), totaling $1100.

Step 4: Calculating the Hedge Bet

Now, you want to make sure that if Team B wins, you also get $1100.

To find out how much to bet, you use the formula: Desired Total Return / (Odds / 100 + 1)

For Team B, this would be $1100 / (150 / 100 + 1)

$1100 / 2.5 = $440

Step 5: Verifying the Hedge

If Team B wins, your $440 bet would net you $660 in winnings (440 * 1.5).

You'd then get back your initial $440 along with the $660, totaling $1100.

Step 6: Total Investment and Profit

You've bet $600 on Team A and $440 on Team B, which totals to $1040.

You stand to make a return of $1100 either way, securing a profit of $60 ($1100 - $1040).

Step 7: Shifting Funds and Managing Risk

You will lose the initial investment on the losing bet but make it back, and more, from the winning bet. You'll need to withdraw some money from the winning sportsbook (assuming the balance is $0 on the other) and re-deposit back onto the losing sportsbooks to continue betting. Additionally, you need to place both bets before the odds change to secure this guaranteed profit.

Rule of thumb

A quick rule of thumb is if both odds are negative then the arb is “dead”. If one is negative and the other positive there may be an arb opportunity as long as the positive is greater than the negative. If both are positive this is a rare “golden” arb which offers much larger returns than usual (known as a "Heater" 🔥 in the industry).

Returns also tend to diminish as the odds values increase. This means that -120 and +130 odds yield a larger return than -420 and +430 odds. Smaller numbers are better unless you see a small negative odd and a large positive one (i.e -120 and +430) which is a good sign.

Automating with AVO

AVO does all these calculations for you in real-time, tells you exactly how much to place as the hedge bet, and enables you to capitalize on the opportunity swiftly.