Reward without Risk? An Introduction to Arbitrage Betting and the Asian Handicap

For some bettors the appeal of gambling is its uncertainty and the thrill of risking money on an outcome which is not guaranteed. For others, the real thrill is exploiting the betting market to identify risk free betting opportunities. Known in gambling circles as arbitrage betting, these types of bets have gained visibility with the rise of communication platforms which facilitate almost instantaneous transactions. This paper discusses some of the varying arbitrage betting techniques as well as their positives and drawbacks. It then moves on to look at another emerging bet type – the Asian handicap – which is changing the way many Asian and European soccer fans wager.

Arbitrage is generally defined as buying some asset and simultaneously selling it for a higher price (Sharpe & Alexander 1990). In terms of betting, arbitrage refers to any opportunity to eliminate the risk of betting while guaranteeing a profit (Franck, Verbeek, & Neutsch 2009, 6). Arbitrage bettors – known as Arbitrageurs – rely on discrepancies in the posted odds from different sources to flip the tables on bookmakers who usually stack the odds to guarantee themselves a profit (Franck, Verbeek, & Neutsch 2009, 4). Because arbitrage opportunities are identified using posted odds before the fact, parimutuel betting does not allow for arbitrageurs to ply their craft (Franck, Verbeek, & Neutsch 2009, 1). In parimutuel betting, the eventual odds are determined based on the number of participants (Dunstan 1997). That means that the odds can and do change after a person places their wager which prevents arbitrageurs from making accurate bet sizing calculations (Franck, Verbeek, & Neutsch 2009, 1). As a result, arbitrage betting is found exclusively in non-parimutuel betting situations.

The history of arbitrage betting is not entirely clear, but it appears to have been around for quite some time. The earliest academic evidence of arbitrage opportunities comes from the 1980s when two researchers examined betting on British soccer matches during the 1981-82 season (Pope & Peel 1989). The researchers discovered that while arbitrage opportunities were not common, they did in fact exist and could potentially yield up to a 2% return on investment (Franck, Verbeek, & Neutsch 2009, 1). As technology improved in the years since, some observers expected the number of arbitrage opportunities to decline due to improved information sharing among bookmakers (Dixon & Pope 2004). However, technology such as  personal computers and the internet also allowed bettors to identify and exploit short-lived arbitrage opportunities in a more systematic manner (Constantinou & Fenton 2013, 11). As a result, a 2009 working paper which examined betting across the five largest soccer leagues in Europe found that 26% of all matches involved some type of arbitrage opportunities (Franck, Verbeek, & Neutsch 2009,12). Even though most of those opportunities only provide a return of less than 1%, the growth in arbitrage opportunities over the last three decades is hard to ignore (Franck, Verbeek, & Neutsch 2009, 12). In some instances however, the profit margins can be much more significant. One example involving the Hungarian gambling firm SzjRt  in 2007 revealed a potential return of 61% on a single arbitrage bet (Koszegi,  Madarasz, & Matolsci 2007, 5).

Arbitrageurs have several techniques at their disposal to identify and exploit arbitrage opportunities. The first technique, often referred to as intra-market arbitrage, relies exclusively on sportsbooks like In this scenario, the prospective arbitrageur examines the betting lines from several different oddsmakers and compares them to each other (Constantinou & Fenton 2013, 3). It is necessary to use different bookmakers because individual bookmakers calculate their odds to include over-round – a balancing of the odds which guarantees a certain percentage will be retained by the book regardless of the outcome of the event (Franck, Verbeek, & Neutsch 2009, 4). However, using a mathematical formula to combine the available odds from different bookmakers on the two possible outcomes of an event sometimes reveals a discrepancy which eliminates this over-round and guarantees the bettor a return on investment independent of the outcome (Franck, Verbeek, & Neutsch 2009, 6). While some arbitrageurs perform their own calculations, online arbitrage calculators have also emerged to scour all available betting lines and identify arbitrage opportunities which meet the pre-set criteria (Stutely 2009, 7 & 43). These calculators have gained popularity due to the ever present risk of human error when performing calculations which can result in bets which are dependent on the outcome rather than guaranteed arbitrage.

With the rise of the internet, arbitrageurs are seeing new opportunities  emerge beyond the traditional bookmakers. Betting exchanges such as have created a marketplace where bettors can directly choose their own odds rather than relying on an oddsmaker to do it for them (Shearer July 23, 2010). Bettors on these sites have the choice to either accept an existing offer on the exchange or make their own offer and wait for someone else to accept it. For some bettors, betting exchanges are an attractive alternative to bookmakers due to the lower commission they typically charge – with no money of its own at risk, the exchange is able to reduce its fees (Franck, Verbeek, & Neutsch 2009, 2). Arbitrageurs can exploit this opportunity in several different ways. First, they can use the betting exchange similar to the second bookmaker in the previous technique. By setting their own odds and bet size, they can guarantee themselves some winnings regardless of the outcome (Vlastakis, Dotsis, & Markellos 2006). Alternatively, they can accept highly favorable odds from a bookmaker and then re-sell those odds to another bettor on the exchange for more than they originally paid (Franck, Verbeek, & Neutsch 2009, 2). For example, an arbitrageur might bet $100 on Liverpool to win their match at odds of 1.5 which results in a payout of $150. The arbitrageur then immediately goes to a betting exchange and sells the betting ticket – which is worth $150 if Liverpool wins – to another bettor for $110. The arbitrageur is satisfied in this scenario because he made $10 on his wager independent of the outcome of the event, and the second bettor is willing to accept implied odds of 1.36 on his wager.

A final example of arbitrage betting is matched betting – sometimes referred to as lay betting – which tries to remove the risk from gambling by placing a wager on both outcomes of an event (Burek May 21, 2013). In order to truly represent an arbitrage bet, this type of betting relies on free offers from sports books. Many sports books offer free bets to gamblers in order to attract new business (Murray-West December 6, 2010). The opportunity to gain a regular client has some books willing to spend around $500 up front (Murray-West December 6, 2010). Since free bets usually require an initial bet to claim – often around $20 – a bettor can place the free bet on the opposite outcome to offset their initial bet (Guardian June 4, 2010). If the initial bet is successful, the gambler receives their winnings in addition to their original $20. If the free bet wins, the gambler gets the profit from the free bet less the  $20 of the initial wager. Either way, by using correct bet sizing calculations gamblers can make at least a marginal profit (Guardian June 4, 2010). However, such an endeavor is complicated by the necessity of placing the subsequent lay bet on a separate betting exchange which allows bettors to set their own odds (Murray-West December 6, 2010).

As previously mentioned, online exchanges like have gained visibility over recent decades which has increased the opportunities for this type of arbitrage (Franck, Verbeek, & Neutsch 2009, 2). Although there is scant academic research into the profitability of matched betting, there are anecdotal sources suggesting that individuals have managed to turn it into a source of income. Some online gamblers in the United Kingdoms claim to have exploited this system to make the equivalent of £30 per hour – about $48 USD (Burek May 21, 2013). According to a recent article in the Huffington Post, the author was able to make about £800 – $1200 USD – in a relatively quick time (Burek May 21, 2013). A journalist writing for The Guardian in the UK won £770 in under a month by utilizing these matched betting offers (Shearer July 23, 2010). In the UK, such winnings are even more lucrative because of their tax-free status (Shearer July 23, 2010).

Despite the positive that properly executed arbitrage betting eliminates the element of risk from gambling, arbitrage betting is not without its drawbacks. Due to the generally low profit margins of each opportunity – 98% of arbitrage opportunities returned less than 1.2% – bettors must stake large sums of money on each bet to realize any sort of substantial profit (Franck, Verbeek, & Neutsch 2009, 12). That can lead bookmakers to review their bets for irregularities such as arbitrage betting and can even result in half of an arbitrage bet being canceled (Franck, Verbeek, & Neutsch 2009,1 5). Arbitrage betting also carries the risk of failing to finish both legs of an arbitrage bet before the opportunity disappears. Because bookmakers are constantly changing their lines in response to betting patterns, most arbitrage opportunities last less than 15 minutes (Marshall 2007, 2). Some last only seconds. For various reasons, bettors often fail to complete the second half of the arbitrage bet before the odds change leaving them exposed to risk just like a traditional gambler (Franck, Verbeek, & Neutsch 2009, 15). Even if an arbitrageur successfully places both bets, there is still the possibility that one of the bookmakers will declare that a palpable error has been made and simply refund all bets (IBAS 2012, 105). That is a legal measure in the UK which again would leave the bettor exposed to the risk of the other half of their arbitrage attempt (IBAS 2012, 105).

Another type of wagering which is gaining popularity goes by the name Asian handicap betting. In practice, Asian handicap betting looks much like the spread bets accepted by Las Vegas sportsbooks. Rather than taking bets on the actual winner or loser of a match, Asian handicap betting assigns a particular margin of victory which the winning team must exceed in order for backers of that team to win their bet (Marttinen 2001, 6). For example, in a match between Liverpool and Manchester United, Liverpool may be listed at a -2 handicap. If Liverpool loses the match, or wins by fewer than two goals, then bettors backing Liverpool lose their wager (Rajkovic 2013). If Liverpool wins by exactly two goals, the match is declared a push and all bets are refunded (Olesen 2008). In Asian handicap betting, a push is distinct from a draw in that it is not considered a separate possible outcome (ISF 2011, 16). On the other hand, if Liverpool wins by more than two goals, the team’s backers will receive their original stake plus the attendant winnings. In addition to goal differential, Asian handicap betting can also include bets on the total number of goals scored in a match (ISF 2011, 41).

One of the attractive features of Asian handicap betting is that it eliminates the possibility of a draw as a third possible outcome. It does this through the introduction of the ‘push’ along with half-point handicaps. Half-point handicaps – such as +2.5 or +0.5 – eliminate the possibility of two teams tying once the handicaps have been used to adjust the actual score of the match (ISF 2011, 16). Some books go even further and utilize two-way bets or quarter bets. Quarter bets are more complicated than typical Asian handicap bets because they actually split a bettor’s wager into two separate plays at the nearest half points (Matrix Sports Investing 2014). For example, if $1000 is wagered on a team with a -2.75 handicap, the $1000 bet is actually split into a $500 bet at -2.5 and a $500 bet at -3. Several different outcomes are possible in such a scenario. If the team loses or wins by 2 goals or fewer, the bettor loses both stakes (Olesen 2008). If the team wins by 3 goals, the bettor receives a payout for the $500 bet at -2.5 and is refunded the original $500 wagered at -3 because that outcome was a push (Olesen 2008). However, if the team wins by 4 or more goals, then the bettor receives a payout on both halves of his bet (Olesen 2008. The ultimate goal of these half and quarter point handicaps is to balance the volume of bets on both potential outcomes which insulates the bookmaker from any potential losses (ISF 2011, 16).

As the name suggests, the practice of Asian handicapping originated in the Far East (Tang 2013, 12). While the exact beginning of Asian handicapping is uncertain, its popularity has been traced back to 1998 when  Joe Saumarez Smith – a journalist – was asked to translate the local name for the practice (Asian Sports Net 2014). He rendered it as ‘Asian handicapping’, and so the name was born (Asian Sports Net 2014). Asian handicapping is most prevalent in Asia, but it is not an isolated geographic phenomenon (Tang 2013, 12). As early as 2001, the UK based Eurobet was incorporating Asian handicap betting into its offerings (USSEC 2002, 12). Since then, the practice has gained popularity in the UK with The Betex Group reporting turnover of £86.6 million for Asian handicap betting division in 2005 (Betex 2005). That amount pales in comparison though with the estimated $75 billion of annual bets handled by the underground market in China with a significant portion comprised of Asian handicap bets (Betex 2006).

Like any other type of wager, there are pros and cons inherent to Asian handicap betting. As mentioned earlier, eliminating the possibility of a draw decreases the number of possible outcomes from 3 to 2 which simplifies the calculation of betting odds (Marttinen 2001, 8). This is beneficial not just for bettors who are now faced with a more straightforward decision but also for bookmakers (ISF 2011, 16). Bookmakers are able to more accurately balance wagers on both possible outcomes which minimizes the actual risk for the bookmaker and allows them to accept larger wagers without putting themselves at an undue risk of loss (SBC 2012, 6). Finally, the introduction of handicapped odds can generate interest in otherwise insignificant events (Marttinen 2001, 8). Of course the best Premier League time is almost certain to defeat a team from a lower division, but it is much less certain that they will win by 4 or more goals. By adjusting scores using handicaps, bookmakers introduce an element of excitement which can be used to attract new gamblers (Tang 2013, 12; Marttinen 2001, 6).

Of course, these positives do not come without offsetting negatives. One reason Asian handicap betting is so attractive to bettors is its low margins (USSEC 2002, 12). This makes bookmakers more reliant on a large volume of betting in order to make a profit because there is less gain from vigorish. Some bookmakers have also experienced significant losses due to a failure to balance both sides of the betting. In 2005, The Betex Group reported losses of £948,840 for its Asian handicap betting division (Betex 2005). However, by the second half of 2006 the company was able to reverse that trend with a gain of £540,000 (Betex 2006). Additionally, the added significance of individual goals rather than overall results has led to allegations that Asian handicap betting may increase the risk of match fixing (ISF 2011, 14). A player for example could allow an extra goal in a 4-2 victory which would not affect the outcome of the match but could influence the betting outcome in the winning team’s handicap was -2.5. At this point, these concerns are more hypothetical than practical.

Both arbitrage betting and Asian handicap betting offer gamblers intriguing opportunities. By ostensibly removing the risk from betting, arbitrage attempts to transform a wager from a gamble to an investment. However, due to the ever present risk of human error and the possibility of logistical snafus when placing bets even arbitrageurs can fail to realize gains. Asian handicap betting on the other hand  tries to infuse otherwise insignificant matches with excitement in order to increase the betting action. By eliminating the possibility of a draw, Asian handicaps simultaneously simplify the risk calculations for both bookmakers and gamblers which may explain its growing popularity in Europe as well as Asia.  Based on the popularity of spread betting in Las Vegas, it seems reasonable to expect that growth to continue for the foreseeable future. However, this increased popularity may come at the expense of increased concerns regarding match-fixing in under-regulated markets.

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