Arbitrage

In simple terms, arbitrage means making a riskless profit. In finance, an arbitrage profit is acquired by taking advantage of inefficiencies in a given market. We can do the same with betting on MMA. In fact, it is a perfect vehicle to do so. Due to the fact that the market is thin and the sport is young, there are numerous chances in MMA that would not be seen in other mainstream sports like football or basketball.

There are two flavors that we are going to try and utilize to maximize our returns while minimizing our risk, and two different ways to weight them.

Price Arbitrage

Price Arbitrage occurs when two different bookies have overlapping lines on the same fight. In layman’s terms, it means the underdog is paying off more than you have to risk on the favorite. For example:

Bookie A Bookie B

Fighter X -190 Fighter X -220

Fighter Y +175 Fighter Y +200

As you can see, betting $100 on Fighter X at Bookie A will payout $52.63, and betting $50 on Fighter Y with Bookie B will payout $100. Therefore, if Fighter X wins, you will have an income of $52.63 and a loss of $50, which will net you $2.63. If Fighter Y wins, you will have income of $100 and a loss of $100, which will even out. Thus, you can only make $2.63 or lose nothing, it is a riskless profit.

Time Arbitrage

Time arbitrage works much like Price Arbitrage, but it is not instantaneous or require two bookies. It occurs when there is a movement in the originally posted line due to the public betting heavily on one fighter and the bookies trying to balance their action.

For example, when the lines are first posted, they look like this:

Fighter X -150

Fighter Y +135

After doing you own analysis, you decide that Fighter X has a much higher probability of winning than 60% and you go ahead and place a $100 bet to win $66.66. Several days later, the public has also been betting Fighter X heavily and the bookie has to change their prices to entice more action on Fighter Y. As such, the line now looks like this:

Fighter X -200

Fighter Y +180

Now there is a chance to bet Fighter Y and capture a payoff that is riskless. So, you bet $60 on Fighter Y to win $108. If Fighter X wins, you win $66.66 and lose $60, to make a profit of $6.66. If Fighter Y wins, you lose $100 and win $108, to make a profit of $8. It doesn’t matter how the fight ends (except with a draw), you will make a guaranteed profit.

Weighting Your Arbitrage Bet

When you have a chance to capture an arbitrage, there are 2 ways you can bet it. You can either maximize the payout for either fighter winning, or you can weight the payout towards the favorite (you can also weight toward the underdog, but it usually isn’t wise to do so). For example, we have this Price Arbitrage from above available:

Bookie A Bookie B

Fighter X -190 Fighter X -220

Fighter Y +175 Fighter Y +200

If we want to maximize our profit, regardless of who wins, we would put $101.15 on Fighter X and $51.48 on Fighter Y, to make a profit of $1.80 on either outcome.

However, we could also weight it more heavily toward the favorite, and only make a profit if that fighter wins. We would bet $100 on Fighter X to win $52.63, and bet $50 on Fighter Y to win $100, thus making our two potential payouts $2.63 and $0.00. As you can see, $2.63 is higher than $1.80, but you also risk not making any kind of profit if Fighter Y loses.

What you decide to do really comes down to a personal preference. If you are very confident, after your analysis, that Fighter X will win, then the favorite loaded bet will be more attractive due to the extra $1.83 to be made. If you are not that confident, it would be best to just take an equally weighted arbitrage and guarantee a $1.80 payout.

Final Thoughts

There is one thing that you should always do in MMA betting, and that is capture an arbitrage opportunity when you see one. No matter what kind of analysis you’ve done, if an arbitrage appears, take it and run. Never risk money when free money is sitting on the table. If the lines are really high, for example, above the ±400 range, go ahead and weight toward the favorite, but still capture the arbitrage. Always capture an arbitrage opportunity. I’ll say that again, ALWAYS CAPTURE AN ARBITRAGE OPPORTUNITY. ALWAYS!