Explaining Arbitrage – the sure way to profit

Explaining Arbitrage – the sure way to profit

The morning that Gordon Brown became favourite
On the weekend on May 15 this year a rumour swept through the Westminster village about a family problem for Tony and Cherie Blair that people concluded would lead to him wanting to step down as Prime Minister. The media showed great restraint and the story was never covered.

But punters “in the know” saw an opportunity for profit and by 10am on the Sunday morning heavy betting on Gordon Brown on Betfair made him favourite to be Labour leader at the General Election. This was the first time he’d been ahead of Tony Blair whose price eased to below evens.

Two bookmakers were offering odds on Blair going before the General Election that were so out of line with the Betfair Labour leader price that it was possible to bet against Blair in one market and bet on him in another and be sure of a certain profit. At one point you could back Blair on Betfair at evens and bet against him on William Hill at 2/1.

    The arbitrage possibility occured because the average price on the two possibilities was greater than evens

By adjusting your stake you were able to guarantee yourself a sure profit whatever the outcome. The only down-side was that you had to tie money up for, perhaps, a year.

It’s not often that such a “sure thing” happens in betting and we were delighted at the time that a number of Politicalbetting.com users were able to avail themselves of the opportunity before the price moved more into alignment less than an hour later. As we know Tony Blair continued in office.

We use this as an example of arbitrage as the first of a series of articles to explain betting terminology to those who are less familiar with the way things work. It is not usual for the odds to be so clearly out of alignment but the nature of political betting is that sometimes such possibilities arise.

Other political markets.

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