Arbitrage Training

Arbitrage trading situations – How to cover two unfavourable positions

One of our customers made a rookie mistake when arbitrage trading at the beginning of the week. He placed an arbitrage bet on a horse race – or so he thought. Potential profit was €20. He placed both sides of the arbitrage bet, and then double checked that everything was fine. Well, it wasn’t! Unfortunately he’d placed a bet on a different horse with the same name – Simply Black.

Arbitrage trading – horse racing mistakes

He placed €604.80 on bet365 on the horse Simply Black not to win the 14:10 at Fairview.

And he also placed €15.57 on Smarkets on the horse Simply Black to win – but not the same one, this Simply Black was racing in Bath at 13:55. It was a truly massive f*ck up.

He had two options – hope that Simply Black in Fairview does not win and he doesn’t lose €604.80. Or, he could cover his positions and take the hit of a certain loss. It is always tough to accept making a certain loss, no matter what size; this is because arbitrage traders are not gamblers, that is why we cover our positions, even with the cost. And I recommended to him that he cover it.

In this article I will show you how to cover two unfavourable positions. Of course, I hope you will never have to deal with such a situation, but in case you do, always cover every possible outcome of the arbitrage bet.

Arbitrage trading – always cover open positions

His bet on Smarkets was only €15.57 on odds of 42. He decided to cover it by placing a lay bet on Smarkets with odds of 100. After he closed his first open position he was down €9.33. Well, that’s not so bad, but what about the second bet on bet365? That was a bigger problem.

His bet on bet365 was €604.80 not to win with the odds at 1.06. So he needed to find available odds to win most preferably again at around 42. But the Simply Black that was racing at Fairview was not as much of an outsider, so the best odds we could find were 7.00, this time on Betfair. If he were to cover his position in this instance, his certain loss from this leg would be €60.

But he didn’t, on the basis that I knew bet365 offers a cash-out on their bets, I advised him to take a look on the bet365 website to see if he could cash-out his €604.80 bet. Luckily, he was able to cash-out for €562.28 – so his loss from this leg was €42.52.

To sum it up – at first our customer set out to, and thought he would, made €20 on the arbitrage bet. After he noticed he had placed his opposing bets on different horses in different races, he covered his open positions and his certain loss was a total of €51.85.

Think before you place your arbitrage bets and always be sure to check the time and location of the race.

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