A sports arbitrage situation occurs when bookmakers' prices differ enough that we can back all possible outcomes of an event and guarantee a risk-free profit no matter what the outcome.
Sports arbitrage opportunities are often refered to as an "arb", "surebet", "underround" or "overbroke".
Yes they do!
Bookmakers don't create arbitrage opportunities with their own prices. If this does ever happen it's because of a mistake. You can't go to a bookmaker and bet on all outcomes without losing money.
You must use at least two different bookmakers. Betting on all outcomes at the same bookmaker wont work. You have to find at least two bookmakers whose prices differ and are high enough so that an arb is created.
This was previously quite a challenge, but with the number of bookmakers on the Internet growing all the time, we now have vastly more odds to compare than before.
Imagine a fictional tennis match. Ladbrokes gives Tim Henman odds of 1/1 and Pete Sampras odds of 10/11. You couldn't make a profit by betting on both players at Ladbrokes.
Let's say you then visit William Hill and they're offering Tim Henman odds of 7/5 and Pete Sampras odds of 4/6. Again you couldn't bet on both players at William Hill and make a profit.
However on a total investment of £100, if you placed £42 on Tim Henman at William Hill at odds of 7/5 and also £58 on Pete Sampras at Ladbrokes at odds of 10/11 you would be guaranteed a profit of over 6% of your total stake no matter which player won.
Sports arbitrage example...