Horse Racing Arbitrage Explained

There is nothing, however, to prevent multiple selections per race from being arbitraged.

It is even possible to arbitrage the same selection multiple times.

Here is an example of multiple arbitrages

A friend of yours sends you a text message. A friend of his is a stable lad.

The stable lad has told him about three particular horses that are running in the 3:30 at Southdown this afternoon.

The first horse is called Purple Patch. It did some exceptional work on a training gallop two days ago. The horse is fit, well and raring to go. If it doesn’t win, it will come close. It is definitely worth an ‘each way’ bet.

Its odds on the betting exchanges, at the moment, are 10.0. It is the fifth favourite.

The second horse is called Bank Balance. Although this horse won its last race ten days ago by a country mile and at a canter, it has not been running well in training of late and may benefit from a rest. Its last race was a close run affair and, apparently, took more out of the horse than was originally thought.

Bank Balance is therefore unlikely to run well. It is currently the race favourite at odds of 2.5 on the betting exchanges. Its favouritism is purely based on its performance in its last race.

The third horse is called Dun ‘N Dusted. In his last race, Dun ‘N Dusted came a close second to a very well regarded horse who has since gone on to record a second win. That race took a lot out of Dun ‘N Dusted and has since lost weight. The horse would probably benefit from a rest.

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As a result, it is very likely that Dun ‘N Dusted will finish close to the back of the field. It is currently the second favourite in the betting at odds of 4.0 on the betting exchanges. This is largely based on its last performance.

Your friend tells you that the information about these three horses is not widely known at the moment. As such, their odds do not fully reflect this information that he has given you.

Based on your friend’s comments, you decide that when the information that he gave you becomes widely known and knowing your friend – it most likely will, the odds on Purple Patch will decrease and the odds on Bank Balance and Dun ‘N Dusted will increase.

You, therefore, place the following bets on a betting exchange:

Bet 1: £5 win bet on Purple Batch at odds of 10.0.

Bet 2: £10 lay bet on Bank Balance at odds of 2.5.

Bet 3: £10 lay bet on Dun ‘N Dusted at odds of 4.0.

You then text all of your friends and give them the information, knowing that most of them will pass on the information to all of their friends.

One hour later, you visit the betting exchange again.

You notice that the odds on Purple Patch have fallen, as was expected, from 10.0 to 3.0 and it is now favourite.

The odds on Bank Balance have, as was also expected, increased from 2.5 to 9.0 and the odds on Dun ‘N Dusted are now 10.0, from 4.0.

You, therefore, place the following bets on a betting exchange:

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Bet 4: £10 lay bet on Purple Batch at odds of 3.0.

Bet 5: £5 win bet on Bank Balance at odds of 9.0.

Bet 6: £5 win bet on Dun ‘N Dusted at odds of 10.0.

Now let’s look at the net effect of the six bets:

Purple Patch wins:

Profit on bet 1 = £5 x (10.0 – 1) = £5 x 9 = £45.

Loss on bet 4 = £10 x (3.0 – 1) = £10 x 2 = £20.

Net profit = £45 – £20 = £25.

Purple Patch loses:

Loss on bet 1 = £5 (the stake).

Profit on bet 4 = £10 (the stake).

Net profit = £10 – £5 = £5.

Bank Balance wins:

Loss on bet 2 = £10 x (2.5 – 1) = £10 x 1.5 = £15.Profit on bet 5 = £5 x (9.0 – 1) = £5 x 8 = £40.

Net profit = £40 – £15 = £25.

Bank Balance loses:

Profit on bet 2 = £10 (the stake).

Loss on bet 5 = £5 (the stake).

Net profit = £10 – £5 = £5.

Dun ‘N Dusted wins:

Loss on bet 3 = £10 x (4.0 – 1) = £10 x 3.0 = £30.

Profit on bet 6 = £5 x (10.0 – 1) = £5 x 9 = £45.

Net profit = £45 – £30 = £15.

Dun ‘N Dusted loses:

Profit on bet 3 = £10 (the stake).

Loss on bet 6 = £5 (the stake).

Net profit = £10 – £5 = £5.

The net profit on the six bets depends on which horse wins.

If Purple Patch wins, the profit = £25 + £5 (because Bank Balance lost) + £5 (because Dun ‘N Dusted lost) = £35.

If Bank Balance wins, the profit = £25 + £5 (because Purple Patch lost) + £5 (because Dun ‘N Dusted lost) = £35.

If Dun ‘N Dusted wins, the profit = £15 + £5 (because Purple Patch lost) + £5 (because Bank Balance lost) = £25.

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If any other horse wins, the profit = £5 (because Bank Balance lost) + £5 (because Purple Patch lost) + £5 (because Dun ‘N Dusted lost) = £15.

Notice that the arbitraging profit is cumulative in that the net profit is the sum of the arbitraging profits made on the three individual horses concerned.

So, no matter what the outcome of the race is, a maximum of £35 and a minimum of £15 will be won, depending on which horse wins the race.

Now, let’s move on.