Arbitrage Betting: Calculation, Execution Risk and Limits

This guide explains how to audit a claimed arbitrage. It does not describe the result as risk-free or recommend increasing stakes.

How is an arbitrage percentage calculated?

For decimal odds, convert every mutually exclusive outcome into an implied probability:

implied probability = 1 / decimal odds

For a two-outcome market priced at 2.10 and 2.05:

1 / 2.10 + 1 / 2.05 = 0.963995

The total is about 96.40 percent. On paper, that leaves 3.60 percentage points before commission, tax, currency costs, stake limits and rounding.

The test is invalid if an outcome is missing. A football match-winner market with a possible draw needs three outcomes, while a two-way qualification market may need only two.

How are stakes distributed?

Assume a total outlay of 100 units and the same prices, 2.10 and 2.05. First divide each implied probability by their total:

• Outcome A: (1 / 2.10) / 0.963995 × 100 = 49.39;
• Outcome B: (1 / 2.05) / 0.963995 × 100 = 50.61.

Why can the real position fail?

The prices must be available for the required stake at the moment each leg is accepted. Betfair's exchange guide explains that an order can be unmatched or partially matched and that available prices move quickly.

If the first 49.39-unit leg is accepted but the second price falls before 50.61 units are accepted, the position is no longer the calculation above. Trying to repair it at a worse price can lock in a loss.

Which settlement differences matter?

Two market names that look similar can use different rules:

• one includes overtime and the other does not;
• one uses a dead-heat reduction;
• one voids after a venue or participant change;
• one settles on an official result at a different time;
• one permits a draw or push that the other does not.

Compare the complete market rules before treating outcomes as opposites. A later dispute cannot be solved by the price calculation if the receipts cover different events.

How do lay liability and commission change the result?

An exchange lay can cover the opposite side of a back bet, but the amount at risk is liability, not the lay stake. At decimal lay odds L and lay stake S:

liability = (L - 1) × S

Commission on net market winnings and any currency conversion must be included before deciding whether a margin remains. The hedge-betting guide gives a fuller back-and-lay example.

Arbitrage audit checklist

1. List every possible settlement outcome.
2. Copy the exact market, event period and rules for each leg.
3. Calculate with the accepted odds and permitted stake.
4. Record matched and unmatched exchange amounts separately.
5. Include liability, commission, tax, conversion and rounding.
6. Recalculate the final position from receipts, not quoted prices.

Do not borrow, increase a spending limit or chase a failed leg to restore a spreadsheet margin.

Sources and update record

This guide was fact-checked and recalculated on 27 July 2026. Execution, liability and commission claims were checked against Betfair's official exchange guides. Probability-disclosure context was checked against UK Gambling Commission RTS 3.

The previous BBA page framed arbitrage as a simple pros-and-cons decision. This replacement preserves the information need as a reproducible risk audit.

Frequently asked questions