Betting?

[UncleEbenezer]

Somewhat intrigued by our political drama, I tried to look up betting odds. I came upon a betting odds site which lists different bookies' odds on Boris leaving in 2022, 2023, or later.

The best available odds shown on that page are
2022: 1/12
2023: 31:1
Later: 37:1

That seems to offer arbitrage for a sure win. For example, I could buy £1300 for a cost of £1200 bet on 2022, plus £41.94 on 2023, plus £35.14 on later. That is to say, a guaranteed £1300 for a total cost of £1277.08. And since there's no downside, why not scale it up?

Ok, given that my money may be tied up until 2024, that's not necessarily much of a return. But if such a set of bets merely exists, why aren't the bookies onto a sure loser? How does the industry make money (net) when they offer such sure-win odds?

[dealtn]

Somewhat intrigued by our political drama, I tried to look up betting odds. I came upon a betting odds site , which lists different bookies' odds on Boris leaving in 2022, 2023, or later.

The best available odds shown on that page are
2022: 1/12
2023: 31:1
Later: 37:1

That seems to offer arbitrage for a sure win. For example, I could buy £1300 for a cost of £1200 bet on 2022, plus £41.94 on 2023, plus £35.14 on later. That is to say, a guaranteed £1300 for a total cost of £1277.08. And since there's no downside, why not scale it up?

Ok, given that my money may be tied up until 2024, that's not necessarily much of a return. But if such a set of bets merely exists, why aren't the bookies onto a sure loser? How does the industry make money (net) when they offer such sure-win odds?

Let's assume that site is both accurate and up to date - so arbitrage exists.

Very few people will arbitrage that opportunity, which is the mechanism for price correction. The overall cost to the industry would be small in practice.

In addition many people don't bet at the best odds available. They stick to an bookies they have easy access to, be that physical or by an account or app. The industry captures a lot of "spread" that way.

Novelty markets are either run at huge margins - attracting novelty punters who don't understand the maths, or even care. It's just a fun punt. Alternatively they are run at very tight margins to attract new punters that discover the fun of betting through novelty punts, and move to mainstream, and higher margin, regular betting.

(Plus the time to pay out often leads to the availability of cheap working capital - as you point out - but also the reality that many don't collect on their winnings in the (distant) future - due to forgetfulness, or losing the betting slip, or just not being bothered).

Arbitrage opportunities are rare, and successful practitioners are soon denied opportunities through account restrictions. Its a very sophisticated market, and the bookies are very good at it.

[redsturgeon]

Moderator Message:
I have removed the links to the betting odds site since google can get a bit iffy if we are linking to such sites from here.

[SalvorHardin]

Sometimes arbitrage opportunities do arise in betting markets, though you have to be quick and you'll need accounts with two or more bookmakers. They don't last that long and the bookies have a habit of shutting down accounts which regularly do this.

Whilst the advent of internet betting, in particular via smartphone apps, has reduced bookies' profit margins (aka "vig"), their profits have risen somewhat thanks to an increase in turnover. A typical book on a sporting event sees a vig of around 3% to 10%.

Some betting markets are very profitable for the bookies even when they have a big vig. One that springs to mind is The Grand National. For example, in 2010 the vig on the Grand National Starting Price was 55% and there were complaints.

"The annual rip-off of the unenlightened punter eclipsed previous records at Aintree last Saturday when the starting prices for the Grand National reached an alarming 155% overround." (i.e. 55% vig)

https://www.theguardian.com/sport/blog/2010/apr/15/grand-national-starting-prices

Another is the next person to play James Bond. Periodically someone is catapulted to the top of the betting thanks to their latest film or TV series and a lot of money is taken. Then a few months later someone else becomes the favourite and the previous favourite drops quite dramatically down the ladder. Back in 2018 Tom Hiddleston was installed as the 2-1 favourite not long after "The Night Manager" hit our screens, he's now 33-1 whilst the favourites are 4-1. The bookies really appreciate Daniel Craig lasting as long as he has as Bond

There is a big profit margin in the betting for the next Conservative party leader, which has had a huge increase in interest in the last few days. I ran the odds for a major bookmaker through my spreadsheet and, lo and behold, their vig is over 110%.

In case you're wondering how the vig is calculated, convert the odds on every participant into percentages then sum these percentages to get the "overround". Subtract 100% and that's the vig. So with a 110% vig, punters are actually paying 2.1 times the true odds.

[AF62]

bookies' profit margins (aka "vig")

I had only ever heard ‘vig’ in terms of interest payable to (American) loansharks, so interesting that it is used for the term for the profit on sports betting as well.

[SalvorHardin]

bookies' profit margins (aka "vig")

I had only ever heard ‘vig’ in terms of interest payable to (American) loansharks, so interesting that it is used for the term for the profit on sports betting as well.

It's used in America for all sorts of betting. I have never heard it used in the UK, except by myself and a few friends (we're big fans of "The Sopranos", where it is regularly used).

https://en.wikipedia.org/wiki/Vigorish