Original URL: http://www.theregister.co.uk/2010/11/26/free_cash_bookies_2/

Gamble to win and lose... and win

Taking cash from bookies: Part II

By Team Register

Posted in Media, 26th November 2010 12:29 GMT

Jolted out of my savings inertia by the paltry 0.75 per cent I was getting on my Alliance and Leicester ISA, I decided to experiment with another tax efficient investment vehicle – gambling.

To be more accurate, the practice I am writing about is not strictly gambling but rather "sports arbitrage" - the technique of betting on all outcomes of a sporting event, when the different prices available from different bookmakers means this will result in a risk-free bet (I'll come back to the risk-freeness of all this shortly).

To get the idea, say Tennis Player 1 at Bookie 1 has the odds 2.05 and Tennis Player 2 at Bookie 2 has the odds 2.05. If you bet £500 at both bookies, you would win £25 regardless of which player was victorious – you've bet a total of £1000 and had £1025 returned (£500 x 2.05). Its a 2.5 per cent return on your investment, and the bonus is that gambling winnings are not taxable in the UK.

How it works

Here's some real world examples. In today's NFL match between the Dallas Cowboys and the New Orleans Saints, you you could bet on Dallas at odds of 2.02 with Pinnacle Sports and New Orleans with Betsson at 2.04. £50 on each side would guarantee a profit of £2 if the Saints win and £1 if Dallas win. £500 on Dallas and £495 on the Saints (rounded betting sums so as not to make the bookie suspicious) would guarantee £15 or £14.80 depending on the result. A 1.5 per cent return doesn't sound a lot, but this is in one day, and these opportunities happen every day.

money trap conceptual illustration

Making money with arbing requires patience, meticulous book-keeping, and practice

If it wouldn't make your bookie suspicious about your market knowledge you could have bet on today's Albanian soccer cup. Kastrioti Kruje was 2.16 with bookie SBO and Shkumbini was 2.00 with 12Bet. £200 and £215 respectively would net £17 or £15 depending on the winner.

Or you could look to this weekend's glamorous FA cup fixture of Torquay against Walsall. Ladbrokes has had Torquay at 2.25, Pinnacle Sports had Walsall at 1.877. £200 with Ladbrokes and £240 with Pinnacle will see a return of either £10 or £10.53.

There is homework to do of course. The above examples used Asian Handicap markets, which avoid draw results in soccer, and if you're in the US you'll be used to a different moneyline odds system. But the theory easily offers a better return than the current UK savings market.

The theory works, but what about the practice? To work as an investment strategy you need to open at least 20 bookmaker accounts, fund them, and also find lots of these arbitrage opportunities. These don't hang around for long, and though you can find them for yourself, the growth in online betting means there are online services that trawl the web and find them for you for a fee. These services tell you who to bet with, what to bet on, how much to bet, and can open bookmaker browser windows for you at the right event. I've used a couple of them in my experiment.

It's not for gamblers...

Rajeev Shah, founder of the arb service SportsArbitrageWorld, points out the opportunities for them are almost endless and always renewing themselves event after event. His view is that if you enjoy risk and like gambling, arbitrage is not for you.

The idea is to turn your capital over as often as you can, never tying it up for events too far in the future. Profits per event are usually between 1 per cent and 5 per cent of the total stake, and a fair monthly target is between an 8 per cent and 12 per cent return on your investment. Handling a £10,000 to £15,000 bankroll would probably require an hour or two each evening and some weekend activity to maximise returns.

The team at RebelBetting make between 9 per cent and 14 per cent every month, using their own software, and exploiting sub-2 per cent trades. The Yeovil/Southampton example came from their site Sports Arbitrage World costs £149 a month to join and RebelBetting is priced at €99. SAW scans more sporting events and bookmakers than RebelBetting.

So, if it's so simple, why don't more people do it? Making money by arbing requires patience, meticulous book-keeping, and putting in quite a few hours learning how to do it. You should practise with at least 100 low-stake arb bets before stepping up your limits.

What to look out for

My job involves sitting in front of a PC all day, so instead of messing around with a myriad of online distractions, I put in the time. I also made the mistakes. It's easy to back the wrong team, bookmakers can cancel bets without warning, odds can change mid-trade, and bookies can limit how much you can bet and unbalance a transaction (I've also not used my name on this article in case some bookmakers decide to close my accounts). All these issues can be sorted once you know what you're doing.

Then if you're getting all this right, you might find your money is not in the place you need it, it's sitting with one bookmaker, or riding on a wager, when a big margin opportunity arises. My bank also reassuringly blocked all deposits to bookmakers until I'd had a phone chat with them.

So how did I get on? The headline figure is my profit is £1,578.85 over 12 weeks, starting with £3,000. I've been disorganised and not maximised opportunities. A little over £1,000 of this figure comes from grabbing the introductory bookmakers offers and free bets, which the arbitrage process means you keep instead of losing (see Part I).

I've bet on major sporting events, football across Europe, North and South America, cricket, motor racing, and Women's under-20 basketball. I've not had an emotional attachment to any of the results.

However GamCare, which helps problem gamblers, warns there is always a danger with free bets that some people might either chase losses using their own money. Or, if they win, they may begin to gamble with their own money in the hope of another win.

Something else to consider is that though HMRC says gambling winnings are essentially tax-free, this ruling is aimed at recreational betters. It has different rules for activities classed as trading, so if you get serious about this, consult your accountant.

Arb technology

The tech behind the arb services RebelBetting, based in Northern Sweden in a city called Umeå, is running a small army of about 25 cloud computers located in the US and UK to crawl the bookmaker sites.

MD Simon Renström says, “It's tiny virtualised Linux boxes running our custom multi-threaded Mono .NET software. Because we're a small upstart company, RebelBetting really wouldn't be possible without the revolution of cheap, accessible cloud computing.”

The army of spiders report the odds data back to Rebel headquarters, a small distributed cluster of three more powerful machines. These work together to analyse the information, sort the odds into the correct events and participants (Renström says you'd be surprised how many different names the books can have for the same team), and compare the thousands of possible combinations of arbitrages.

“The whole lap from crawling the website to presenting the arb to the customer cannot take more than 60 seconds, so everything is heavily optimised. Later this year our goal is to cut down the lag to as low as 20 seconds,” says Renström.

All software is custom-built by RebelBetting, primarily in .NET. It also uses a lot of open-source components and algorithms. “The biggest technical challenges have been to keep everything running under 60 seconds when we're constantly adding new bookmakers, sports and markets – which results in an ever-increasing number of odds to compare – while still keeping a very high quality of data. We need to find as many arbs as possible, while presenting as few false positives as possible.

"It's been partly solved by adding more machines, but mostly through re-thinking and optimising the server logic. Adding a new bookie can take between one and five days, depending on a lot of factors. Some deliver their odds in a structured XML feed, while others give us no other choice than to crawl and "screen scrape" hundreds of web pages every minute. Our unique auto surf feature also takes a fair bit of time to get right.

"We were actually expecting that the bookies would try and make it hard for us to get our data, but so far that's not happened at all. What we've realised is, the books with the best odds actually make a profit from the arbers in the long run, and they know this.“ ®