Is Arbitrage A Sure Bet?

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“Add two cups of a global financial crisis, stir in three table spoons of job uncertainty, 10 mls of mortgage stress and a pinch of panic and you may have found the perfect recipe for scams” states the Australian Consumer Watchdog, the Australian Competition & Consumer Commission (ACCC).

No wonder then, that sports gambling scams are becoming popular.

Australians love sport and many of the most famous sporting heroes like Cricketer Don Bradman or the legendary racehorse Pharlap developed legendary status in the Depression.

If your in the USA perhaps you can relate to Babe Ruth and Sea Biscuit.

“The footballer as representative had become the true working class hero. He came from these streets where the spectators lived”  wrote Arthur Hopcraft of the English football player in his classic The Football Man.

One site selling arbitrage gambling software began by quoting the he Christian Bible’s admonition to have the freedom of speech of a good conscience before beginning its spiel.

So what is arbitrage?


In economics, an arbitrage opportunity is “the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.” So if my neighbor has a second hand book I buy off him for a dollar which I know I can sell at a rare books store for $200, the $199 profit is arbitrage.

A lot of people use garage sales or flea markets to pick up things to sell.

Now you don’t find rare books in people’s backyards too often so the opportunity is rare. If you took this up as a profession you would have to learn how to value things because or you might buy useless junk. The time and effort in researching if costed per hour may in fact be quiet expensive. In other words, you may have made more money per hour  had you traded your time working for MacDonald’s.

To explain the problems with sports betting arbitrage lets extend the analogy.

K-Mart is discounting  DVD copies FF buy as many as I can and sell them with a 50% markup on eBay.

  1. K-Mart sells of copies of DVD’s of FF.
  2. Kmart raises the price on remaining copies because there has been a rush on FF (afterall, I’ve been buying them up to see them!)
  3. Other eBay sellers realize what I’m doing and sell FF too, they undercut my price. This increase the demand, and price at Kmart and squeezes my profit margin.

In other words, the laws of Supply and Demand took effect.

Internet and computer technology makes it possible to exploit these short windows opportunity. Fluctuations in value are what Forex and share traders thrive on.

So how does this apply to sports gambling?

Sport arbitrage involves betting on both outcomes of a sporting event and intending of profiting regardless of the outcome. Sports arbitrage works by exploiting the differences between odds offered by books makers or by betting on multiple outcomes.

Say you have a friend Joe who thinks the Brisbane Lions will win a minimum of 16 of their football games this year.  Robert thinks the team is hopeless and will be lucky if they win 12.

So I bet $100 with Robert they will win more than (over) 12 and $100 with Joe they will win less than(under) 16.

It might be depicted like this:

Joe’s Bet: Brisbane Lions Wins Over/Under: 15.5

Robert’s Bet: Brisbane Lions Win Over/Under: 11.5

The point “.5’s” is simply a way of not counting tied games.

If the Lions win 11 or less I would lose Roberts bet but win Joes. If they win 16 or more I lose Joes Bet but win Robert’s.

I neither win nor lose.

However, if Brisbane wins 13, 14 or 15 I win both bets!

“Sports arbitrage usually involves gambling on sporting events with two teams. It is promoted on the basis that bookmakers will either differ on which team will win or ‘make a mistake’” writes the ACCC.

There are different types of systems, but they all exploit variations in the betting market.

A claim often used by promoters of arbitrage is that by using the computer and internet it is possible to exploit time differences and the alleged lack of understanding that oversees bookmakers have about local sporting events. In the USA online gambling is illegal.

“Essentially it’s claimed that bets are placed on both teams, playing to get the best odds. The promoters claim they can spot ‘opportunities’ and take the best odds on offer by different bookies so that money is won supposedly regardless of the outcome” writes the ACCC.

Sports-arbitrage-dice-20090114

So what’s the problem? Isn’t this just like exploiting fluctuations on the stock market?

In fact, Sports Arbitrage marketing often claims to use similar techniques used by large financial institutions or the secret techniques of professional traders in their very glossy brochures full of impressive charts and graphs.

Arbitrage can work in theory, but is subject to scams like any other financial market.

Well if it sounds like you can’t lose, the reality is quiet different.

“Consumers who participate in these schemes usually complain that the promised returns are false” states the ACCC.

“Operators have gone at great lengths to hide the true nature of these schemes by calling them by other names such as sports trading, sports wagering or sports betting”.

Lets re-evaluate our betting example with Joe and Robert. Well the example of betting with Joe and Robert doesn’t include transaction fees and an often very exorbitant purchase price of the arbitrage software.

Imagine you had made the same bet with a sports betting site. Now you have to pay a fee of about 10%.

So if you break even on both bets $100 bets you will have paid $10 in fees (you paid pout $110 and one 100 and if you win you will make $200 ($200 – $20). It’s like risking $1 to make $10.

Well that sounds good doesn’t it?

The fact is that even at best you would break even most of the time – and each time it costs you 10%.

You might argue that it’s still possible to win.

Sure it’s possible. However, gambling is about probabilities.

The question is “Is it probable?”

It comes down to whether the probabilities favor profit or loss.

Sports arbitrage schemes lure consumers by promising a risk free profit with impressive returns. The guaranteed results often evaporate over time as a person waits for the winnings to compound over time. Quiet often the participant is paying ongoing fees and has spent a large start up cost. For example, CSI Arbitrage sells for $17,600 and Tradesmart Technologies sells for $8000, or the $11.000 ‘Executive Packages’.

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Many schemes involve forming a syndicate so that the collective bet is theoretically large enough to cover the multiple possible outcomes within the system. Other systems involve selling expensive software that identifies online arbitrage opportunities.

Sadly many of the winnings don’t eventuate and company sites close down and reopen under a different name.  Some companies do provide a betting system; however, the returns are often far lower than promised. And it may take years sto recoup the initial cost.

A few presently under investigation by Queensland Police are Blue Point Trading Pty Ltd (ACN 128 760 958); Spectre Holdings Pty Ltd (ACN 112 908 648); Morgans Group Equities Pty Ltd; WTS Licensing Pty Ltd and Suncity Equities Pty Ltd; International Market Traders Pty Ltd;Sure Trading Pty Ltd.

What about all those reviews and positive comments?

One should be skeptical of reviews. Often competitors have suspiciously similar IP details

“www.sorttradingguide.co.uk is the front for Baranstone (SORT Trading) and it’s almost identical to http://www.pfdinfo.co.uk/. On this site a ‘Gareth Reynolds’ gives a resoundingly positive rating of the Baranstone SORT Trading software over the ‘competitors’. The ‘competitors’ listed on this site are also Tradesmart / Baranstone creations, their websites also share some identical domain registration details, Kinsealy.com shares the same IP address as Profit From Differences and X Software Solutions“ writes complaintsboard.com

Quiet often new programs are simply the old program repackaged.

BetForReal3

So what are the warning signs?

  • You receive an unsolicited offer, perhaps on the phone, to participate in an ‘investment’ ‘too god to be true’ opportunity
  • The guaranteed impressive returns require ittle work or risk.
  • You cannot access your money until certain conditions are met, for example, your balance reaches $10 000.
  • You receive numerous reasons to explain why the scheme is not working as promised.
  • You have difficulty in contacting the company.

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The conclusion

Fundamentally arbitrage systems would have to be constantly changing. Just as Kmart would alter a products price as demand increased so do gambling establishments adjust the odds when betting patterns favor an outcome.

The internet, which makes it easier to detect fluctuations in betting patterns, also makes it easier for online gambling sites to be aware of what the competition is offering.

If a winning system truly exists, where you could sit back and rakee in the profits from someone elses work,  then by telling the world a company would be killing the goose that laid the golden egg.

However, there are many successful arbitrage traders. Successful traders, of any commodity, have learned to take control of how they play the market. They are not caught up by artificially inflated glossy claims.

Onee ploy of scams is to suggest you jhave to buy now – before the doors close. A good arbitrage software company will not pressure you. If they are genuine, they will be in forthe long haul.

Take your time and dont rush into it.


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3 responses to “Is Arbitrage A Sure Bet?

  1. Whilst there are a lot of scammers out of Australia using sports arbitrage as their vehicle, this article is inaccurate in that it suggests that sports arbitrage itself is not viable. That’s kinda like saying that because a lot of second-hand car dealers have shoddy practices, second-hand cars are never worth owning.

    There’s basic flaw in the way you’ve describe the sports arbitrage process: your example is not a sports arbitrage trade; it’s a Middle. It’s well-known amongst traders that Middles trades are gambles in the sense that whilst there is a chance that both bets will win, there is also the chance that only 1 bet will win and this will result in a small loss.

    Sports arbitrage trades are totally different to this. They only occur when bookmakers are offering prices that overlap each other. That overlap creates a risk-free profit for any trader fast enough to capture it. Of course, the prices change as a result of supply and demand but all this means is that the profits go to the fastest traders, not that the profits don’t or can’t exist.

    It’s absolutely true that the companies you’ve mentioned use exaggeration and hype to make it all sound easier than it is and your warning signs would be well-heeded by anyone contacted by such a company. However, there are also legitimate companies out there supplying sports arbitrage trading software that works and that traders use profitably. The majority of these work on a relatively low-cost monthly subscription basis which means that they have an incentive maintain the quality of their software if they want to keep their customers.

    It’s great that you’re warning people about the scam-artists out there, but it’s a real shame that you’ve made it sound as though sports arbitrage itself should be avoided.

  2. As an arb trader myself i find you artilce very misleading.To trade arbitrage is to trade with out possibility of loss this is why one does it.I cant understand the 10% lose you reffer to?You seem to be very uninformed on the subject.There are ponzi scams in the sharemarket,property market and every other market including arbitrage but they are ponzis not data feeds,software education.Maluf was a scammer but wall street trading is very real!As 100,000s of people like myself trade these markets daily for in my case over 8 years you have very little credibility offering comment about something you in my opinion know less than 1% about.The age old story master of everything master of nothing and a little knowledge is dangerous!Ps live,realtime data feeds,custom aplications,education and at least 20-30k in capital and anyone can be a arbitrage trader in sports markets.Get 5-10million and realtime datsa,education and you can arbitrage currency markets and for that matter any market.But with you 6th grade knowledge i would stick to making ABC wedsites and filling them with misinformation as i can see this seems the only thing you have achieved so far!

  3. U cant make any arb without knowing bet conditions in the bookies U use. But when U learn conditions and once U include them into your mathematical sheme(or logical, or softver, of spreadsheet) U cant make lost.
    I use just excell spreadsheet where I have made a calculation, I follow one service on the net with odds changing infos…and Im making arbs on relation: local-two online bookies.

    Till now, I have made the 5.5% return of investment…and I more than happy

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