Basic Arbitrage Calculations

Basic Arbitrage Calculations

There are several different ways to calculate arbs. The example on the previous page shows the most straight forward way to calculate exactly how much you will win or lose on a trade. Find your two best odds, pick a value that you want the final winnings to be, divide that figure by each of the two odds, and add those two numbers together. That answer is your investment and the final winnings that you initially chose is how much you will have after the bets have been cleared. If the winnings are greater than the investment, you have an arb.

Find your odds:

Victor Chandler = 1.20
Pinnacle Sports = 8.00

Pick your total winnings:

$1000 (this is an arbitrary amount. The higher the sum you pick, the larger the bets and the greater the profit)

Calculate: Divide your chosen total winnings amount by each set of odds to get each respective bet amount. Add them together to get your total outlay.

($1000 ÷ 1.20)+($1000 ÷ 8.00)=your total outlay $833.33+$125.00=$958.33
You now know exactly how much you are outlaying ($958.33) and how much to bet at each bookie ($833.33 at Victor Chandler, and $125.00 at Pinnacle Sports). Calculating your profit is just as easy:

Winnings-Outlay=your total Profit $1000-$958.33=$41.67
And finally, to calculate your return on investment you simply divide your profit by the initial amount invested: $41.67 ÷ $958.33 = 4.35%

This method does not allow you freedom with your calculations though. If you only had $96.54 in yourPinnacle account, you would not be able to place the $125 dictated by the maths above – you would have to guess and check the ‘total winnings’ amount in order to find the right volume to match your betting limitations. The method used to make the appropriate calculations for that scenario are explained on theadvanced calculations page, using the concepts described below in the Arbitrage Percentage section.
Calculating Arbitrage Percentages

All arbitrages are expressed as a percentage. Contrary to what you would usually expect, this percentage is not the same as your return on investment. The arbitrage percentage is calculated by dividing 1 by each set of odds and then adding them together.

1 ÷ 1.20 = 83.333%
1 ÷ 8.00 = 12.5%

83.333% + 12.5% = 95.833%

This percentage, 95.833%, indicates what portion your investment will take up of the total winnings. In other words, if your winnings were to be $1000 as used in the example above, the two bets add up to $958.33, 95.83% of the total winnings. This means that 4.17% of the winnings was not invested, and is therefore left over as profit. Thus, when people refer to arbs as a “95.83% arb” or a “4.17% arb”, they are talking about the same thing. Notice that 4.17% is not the same as your return on investment (4.35%) because 4.17% is the percentage of the total winnings, not the percentage of the amount invested.