In an earlier post I mentioned the fact that I had placed a bet on the Bulls in the semi finals of the Super 14 competition. The Bulls are highly fancied to win the tournament because they have home ground advantage and their stadium is at high altitude. This tends to sap the energy out of visiting teams who are used to sea level fixtures.
Oddly enough, bookmakers were offering 2.40 on the Bulls to win the tournament. This is generous because they were installed as heavy favourites in their semi final against the Crusaders. On top of that you knew that if they reached the final they would again be installed as the favourite. Based on the odds on offer for the Bulls to win the tournament compared to their odds to beat the Crusaders, I made the gamble that I could bet for and against the Bulls to win, and lock in a guaranteed profit.
Fortunately I was correct. Due to the predictability of the odds on offer, I was able to lock in a profit without any substantial risk. It was possible because the odds on the Bulls to win the tournament were too generous.
Note that draws aren’t possible for these fixtures because it is a knock out tournament.
On the 18th of May I placed $50 on the Bulls (the only South African team left) to win the tournament with the following odds.
| | | Winning Country | New Zealand | | | 1.53 | South Africa | | | 2.40 |
To hedge my bets against the Crusaders in the semi finals I put $18 on the Crusaders to beat the Bulls at odds of 2.75. This would have left me with zero profit had the Crusaders won, but would have prevented a $50 loss.
The Bulls won the game which set up the following odds against the Chiefs in the final. Up to this point I have made a $50.00 bet on the Bulls and a $18.00 bet on the Crusaders, for a total of $68.00.
| | | Outright Winner | Bulls | | | 1.45 | Chiefs | | | 2.70 |
So how much should I bet on the Chiefs? I have two options. I could set up my bets so that I make a profit if the Bulls win, with no loss if the Chiefs win. Alternatively, I could set up the bets so that I make an equal profit regardless of who wins.
For the first option I would need to set an amount (x) that would cover all of my betting expenditure if the Chiefs win.
2.70x = 50 + 18 + x
1.70x = 68
x = $40
If the Chiefs win the final, I would secure a profit of ($40*2.70) – $18 – $50 = $0.00. If the Bulls win I would secure a profit of ($50*2.40) – $50 – $18 – $40 = $12.00.
By placing $40 on the Chiefs at the 2.70 odds, I would provide myself with a risk free profit regardless of the outcome. Because this hedge only makes money if the Bulls win, I refer to this as a biased arbitrage bet. You can learn more about arbitrage theory here.
If I wanted an equal payout regardless of who won the final, I would bet an amount (y) on the Chiefs such that:
Profit if Bulls win = profit if Chiefs win
($50*2.40) – $50 – $18 – y = 2.70y – $50 – $18 – y
$52 = 2.70y – $68
$120 = 2.70y
y = $44.44
Rounded to the nearest dollar, a $44 bet on the Chiefs would provide $6.80 if the Chiefs win, and $8.00 if the Bulls win.
Because I plan to watch the game live this weekend I have opted for the ‘unbiased’ option so that I can watch the match stress-free.
Always take a close look for arbitrage opportunities when a particular team is offered generous odds to win a tournament, but at the same time, is heavily favoured to win each individual game. By taking advantage of the 2.40 odds on the Bulls to win the tournament, I was able to bet against them in each fixture and secure a profit regardless of the result.