Arbitrage will never be dead in sports betting.  The issue is that in this present era one must be more creative and vigilant to create opportunities for winning both sides of your bet.  Whether applied to stock trading, commodity trading, the money market or sports betting, the purpose of Arbitrage is to put yourself in position to receive great reward for minimal risk.  Before we go into assessing the potential for arbitrage in today’s market, a review of history may be helpful.

Modern day sports betting arbitrage or “middles” first became prevalent in the early 1980’s.  Back in the 1960’s, a computer main frame at Carnegie Mellon University was used to handicap minor sporting events in the Pittsburgh area.  Some 15 years later, this program was modified, refined to the point where it could more accurately reflect a betting line than what the Las Vegas linemakers were putting out.  When this program fell into the hands of a well-financed sports betting syndicate “the computer guys” were formed.  They would place wagers on the value side with great confidence.  They became so successful that they forced the line to move 2 or 3 points per game in basketball or football.   The more they won, the faster the line moved.  Soon it became obvious to them that they could create “middle” situations by wagering even more than they wanted on a particular game then buying back when the number hit its peak.  As the months and years rolled on, this syndicate became nationwide with an intricate network of phone calls resulting in major line moves within 1 or 2 minutes after they moved millions of dollars at their desired price.  After they felt the line had moved sufficiently, they would in some cases buy back the other side creating a “middle” position and holding the appropriate long money on the side they deemed to be the best value.

As time went on, they developed corollaries of this pattern.  Sometimes, they would send out the wrong side for the sole purpose of driving the number to the point where they could take a longer position on the opposite side where they felt the value existed.  When things were going really good, they would simply create2 or 3 point “middles” on games where they felt the line was accurate.  In short, it was a betting bonanza until greed and federal authorities slowed their run in the late 80’s.

Still, arbitrage was not dead.  Other syndicates with similar programs began to emerge.  As long as lines were moving, “middles” were existing.  The biggest problem for the bettor was when the bookmakers  who took the wagers at the original number came up short on payday.   Nonetheless, there was money to be made until … the high tech era emerged.

One of the reasons why Arbitrage was so successful was that linemakers were never able to easily communicate the changes among themselves.  It all happened so fast that they were never able to accurately adjust their number to know the winning side.  When lines began to be disseminated on a computer screen, that all changed.  As long as you had “the screen”, you were often able to stay ahead of the line moves.  Then it really became a race to see how fast you could dial the phone without getting busy signals.  But as computers became more sophisticated and prevalent the “middles” began to dry up.  By the year 2000, it was easily identifiable for bookmakers across the world to simply follow the leading sportsbooks and adjust their lines instantaneously.

So where does that leave us in 2011?  It forces us to be more creative and vigilant, and work harder if we ever wish to reap the rewards of “middles”.  There will always be egotistical bookmakers who refuse to follow the winners.  Those who choose that route will most assuredly pay in the long run.  While they exist, your job is to find them and exploit them.  Put your own ego aside and never go against a respected house vs. a rogue.  And there will always exist the opportunities for half time “middles” if you are fortunate enough to be on the right side of the score at half time.  In addition, the creative use of parlays and teasers can create “middle” opportunities when you are savvy enough to be correct on the 1^st half of your propositions.  Always remember, however, the cardinal rule.  Whether you play “middles” or “straight action” make sure you wager only with houses who will pay.

Joe Gavazzi