Arbitrage
This was a term that was originally borne
out of the world of financial trading and later applied
to spread betting. It refers to the practice of taking
advantage of the differential prices of the same commodity
on different currencies and exchanges.
If for instance, one spread betting firm has given
a quote of 31-34 on the shirt numbers of the goal scorers
in a game, whilst another firm has gone with 36-39.
If you have an account with both, you can sell 36 with
the first firm and buy 34 with the second. If the make
up were 28, you would lose six points with the first
firm but gain eight points on the second. The make up
is then rendered irrelevant. The fact that you have
bought at two points lower than you have sold has ensured
the profit.
This type of arbitrage betting is looked upon with
much admiration within spread betting circles. It sets
the pulses of bettors racing and big wins are often
mentioned in both the betting and mainstream press.
If you can operate in this tricky and complex area successfully
then you should be congratulated. There are however
certain aspects that you should be wary of.
The main danger is the fact that although you have
successfully obtained a sell with one firm doesn’t
mean you can necessarily execute the trade with the
other to buy at 34.
To successfully operate an arbitrage system, you need
to have a good credit rating, which requires plenty
of available funds or other liquid assets the betting
can be secured against. To make just £200 on one
deal you will need to strike two trades at £100
pounds a point. If you lose, it is highly likely that
you will end up owing the firms a great deal of money.
The point is, they cannot possibly know that you stand
to make an even greater amount off a rival firm. You
must therefore be able to demonstrate on paper that
you are in a position whereby you can pay up to £5000
in losses. Bear in mind that this is to make a mere
£200. The danger lies in the possibility that
one or both companies will suddenly refuse the full
amount of the bet due to insufficient credit.
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