Horse Racing Arbitrage

Apart from the US-based sports, horse racing is a unique phenomenon that collects the largest number and total sum of bet nearly daily. A not so long (in the general run of history) time ago this particular area belonged to bookmakers alone – but then the exchanges came forward. To be very exact, it was Betfair, the leader among the exchanges without fear or favour, that brought the revolution into the horse racing betting. We shall talk more about the exchanges as such later, although this is very relevant to the topic; right now, let us review some new possibilities of sports arbitrage that come into life whenever the horse racing is involved. This form of arb deals is called ‘each-way arbitrage’ and represents one of the most profitable kinds of arbitrage the world of betting can currently offer you. These arbs involve betting with the bookies and then laying with Betfair or other exchanges.

Before we start studying the ‘each-way arbitrage’ more carefully, let us talk about some more average and common surebets that are connected to the horse racing scene. Arbs are not too easy here, for each race includes a multitude of horses and jockeys. And that’s not even all there is – mind also that the horse racing market is an extremely active one, which makes its faithful bookies maintain extraordinarily closely aligned prices at large and seldom make their margins lower than 20% or so. Because of all this, backing all the participants of the race in order to have some guaranteed profit becomes nearly impossible. Even with the help of the exchanges you’ll hardly be able to continue with the regular arb deals here. Of course, occasionally there are possibilities, but they are so quickly collected by the arb bots that you hardly really stand a chance.

However, backing a horse with a bookie and laying it with one of the exchanges is something that is quite easy to organise. You see, this is the most basic of all the ‘each way arbitrage betting’ strategies, but of course there is always space to get more creative, if you’re willing. And there is a great number of methods to commit the act, too.

First of all, try betting and laying exactly the same sum of money. Of course, in this case the horse’s loss will mean that you’ll losing something by paying the exchange winnings’ commission; something you can make easier for yourselves by taking some steps in order to lower your personal commission rate. Sometimes it is possible to earn some bonuses; other times, you would do better by turning to a different exchange. But we digress here. If you take this route, what will happen in case of the horse’s victory? Naturally, you will get to keep all your winnings without a single commission or tax!

Once you know how to rule your money in the bet-lay realm, you can start some curious contrivances. For instance, it is not so hard to create circumstances that will pay off the same sum of money regardless of the outcome with the particular horse – yes, even with the commission problem in order. Also, you can alter everything so that you’ll get more if the horse loses. Here is a nice example of committing some arbitrage trading in this manner:

Horse A
Back it at 3.50 for 500 pounds!

Horse A
Lay it at 3.2 for 500 pounds liability.

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If the horse is being backed at the exchanges like hell, with a lot of money already waiting for the lucky winner, this should be your way of action – especially if there is a window of opportunity with the bookie, like the one you see above, where the prices still haven’t deviated from 3.50. Don’t worry if you see some changes in the numbers by the time everything is all right with the acceptance of your bet. For example, the prices at the exchanges may look more like 3.15-3.20 whereas when you just started evaluating the situation it may have looked closer to 3.30. You can lay the horse a little more with the price continuing to skim lower. Now, the horse doesn’t win, you see? And you get around 50 pounds all to yourself, even with the exchange’s commission! However, if the horse came first, you’d still have enough profit to make you happy. The situation modelled here is normal for at least a half of the races, so you can easily expect to encounter it one day.

Remember again to learn as much as possible about the sport you’ve chosen to bet on. Horse racing is just another field where knowledge means profit. If you can make some time for studying the prices in the morning – or in the previous evening – you can expect to be a wise person learning from other people’s mistakes. This is a great skill for any trader interested in sports arbitrage or other forms of betting. If you can predict the directions and forms of the price deviation, you can move to a whole another realm of so-called virtual arbitrage – but that’s a whole another story in its own right, too.

Each Way Arbitrage

You must know that books have plenty of rules, including ones that touch upon on the ‘each way’ bets and how they get paid out. Naturally, by now you already understand what is an ‘each way’ bet, but we still feel compelled to remind you for the sake of overall solace. So – such a bet occurs when you bet half of your money on the horse’s victory and the rest on the same horse to be among the first 2-3-4 that follow the leader (the exact number of such horses, called ‘placed’ in the UK and ‘show’ in the US, depends heavily on the general quantity of animals and their jockeys participating in a particular horse race). For example, if you bet a horse in an 8-runner race with a bookie at 5/1 (that will be 6.0 if you follow the decimal system), placing 50 pounds each way, you’ll receive the same 50 pounds if the horse is placed… and a total of 250 pounds if it comes first, which very nearly makes this a surebet.

It is arbitrary for the bookies to have a stable rule regarding the place bets payments, even though because of their margin no bookie will be left hungry and needy. As for the exchanges, there are no fixed rules in those cases as such there, although the numbers of ‘placed’ horses will always be set carefully. The place markets at the exchanges are no different from the others, so you can expect some discrepancies between the ‘free markets’ there and the more artificial prices that the bookies tend to set for the very same horses.

Now, if you manage to structure your funds really well, you can use those discrepancies to your utmost benefit. It may look approximately like this:

Race that includes 12 runners (Place for the first 3 horses to come to the finish is paid out in the form of one-fifth of the ultimate win price)
Horse A
Win Price 6.0 (Place price therefore 2.0)

Horse A
Win Price 5.50 – 6.00 (the Bet – Lay Price format, as you can see, is fully observed)
Place Price 1.72 – 1.74

Suppose you can get 100 pounds each way where it comes to the bookie and the horse comes first. In such case you’ll get 800 pounds, which, of course, will include your 200 pounds stake worth.

And now – suppose you lay exactly the same sum with the exchanges. Then, stakes included, you will receive 600 pounds from the victory and 174 pounds for the place – equalling 774 pounds. Yes, the bookmaker will be somewhat more profitable, won’t they?

However, the horses more often than not tend to lose. So just lay a little more when you go to the exchanges – and all will be right with your next arbitrage trading deal. You just have to find out the exact funds to use in order to create a locked-in profit for yourself regardless of the race’s outcome.

This is a very ordinary situation for nearly every race – and for at least three horses out of each average race, too! Just wait for the moment where the bookie lingers with the price shortening and the exchange doesn’t. Sometimes the affectation with which the place prices are made up comes handy, too. There is also an interesting tendency definitely worth remembering: fewer opportunities of this kind are available Saturdays, perhaps because Saturdays is the day when the majority of bettors come out of wherever they lurk.

When it comes to horse racing, you would also do well bearing in mind that some bookmakers offer more places per race than the leading exchanges. This is not a frequent situation, but a possible one, especially when it comes to Cheltenham Gold Cup, the Derby and other big races. Find the horses who ‘cost’ less or just as much on the exchanges, then lay them there and back them both ways with the bookie simultaneously. For example, the bookie may be placing the first five winners and the exchange may prefer to place only the first four; thus, if the horse of your choice comes fifth, you win both the bet and the lay! Reciprocally, when the race is really big a bookie may offer third the winning price for the placed horses – which helps in making your each way bets and lays to your guaranteed benefit. Arbitrage betting at its finest, that’s what it is!

Arb deals can be anywhere, waiting only for you. All you need to do is never close your eyes on them.

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