Arbitrage Gambling
Arbitrage is a situation
when the bookmakers' prices differ enough that they
allow bettors to back all outcomes and still make a
profit. It is often referred to as an "arb".
Arbitrage is to make a combination of bets so that if
one bet loses another wins. There is an implication of
having an edge, at no risk at all or low risk. The
second bet hedges the first. Arbitrage can also be used
as a noun.
The Economics Glossary defines arbitrage opportunity as
"the opportunity in order to buy an asset at a low price
and then immediately selling it on a different market
for a higher price. For example if one can buy an asset
for $5, turn around and sell it for $20 and make $15 for
my trouble then that is arbitrage. The $15 gain
represents an arbitrage profit. Arbitrage in Theory is
very different as compared with arbitrage as in
practice. It may sounds like a great plan though in the
case of sports gambling it is unworkable in practice,
due to the transaction costs. The transaction costs
undermine many arbitrage schemes such as this one as
they turn break-even propositions into losing ones. In
the sports gambling, the sports books require that if
you bet $1110 in order to win $1000. This $110
difference, which is how, the sports
book make money which acts a transaction cost.
With the transaction costs, instead of breaking even the
bettor loses $110. The sport gambling is a case in just
one market where there is the potential for close to
arbitrage profits to be had.
An arbitrage generally takes on more complex forms,
involving several currencies. Take for example that
supposes that the Algerian Dinars – to – the Bulgarian
Leva exchange rate is 2 and the Bulgarian Leva-to-Chilean
peso is 3. In order to figure out what the
Algerian-to-Chilean exchange rate needs to be, we can
just multiply the two exchange rates together.
Arbitrage may be like betting's equivalent of the Holy
Grail. As we all no that no form of gambling is entirely
risk-free, so not even
arbitrage. The
fact is that it is frequently and wrongly acclaimed as
being so is perhaps partly due to the use of the term
"sure win". There are numerous difficulties associated
with the arbitrage betting that can and do eat into the
profits, sometimes with potentially disastrous
consequence also.
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