Spread Betting – “Quarb” Strategies

Richard Lloyd-Henderson

Introduction ................................................................................... 3
Obvious “Quarb” Strategy.............................................................. 3
“Full Quarb” Strategy..................................................................... 4
Not So Obvious “Quarb” Strategy.................................................. 5
Spread Betting Market Bias........................................................... 5
Using the “Market Bias” to your Advantage ................................... 6
Profits............................................................................................ 6
Spread Betting Risk Warning ........................................................ 6
The Arbitrage, Quarb Calculator.................................................... 6

Introduction

In a paper presented at the Royal Economic Society's Annual Conference on
Wednesday 27 March 2002, Economists Dr Paton and Prof. Vaughan
Williams at Nottingham Trent University show that punters can take
advantage of different odds quoted by spread betting companies.

The two economists investigated returns to spread bets on one of the most
popular markets, the number of bookings 'points' in Premier League football
matches. Prof. Vaughan Williams explained:

'Punters using the system pinpointed by our research would have won in more
than 60% of matches examined over the last two seasons. The key to the
system is identifying those cases where one bookmaker is offering prices out
of line with their competitors.'

The possibility of betting arbitrages - buying high with one company and
selling low with another to make a sure profit - has long been well known to
punters. But such cases are increasingly difficult to find and spread
bookmakers are known to restrict the amount of money that can be bet when
an arbitrage position is open.

The two economists describe cases where companies offer prices that are
different but not necessarily far enough apart for an arbitrage as 'Quasi-
arbitrages' or 'Quarbs'. Dr Paton commented:

'Quarbs are more common than true arbitrages, and spread bookmakers are
much less likely to restrict the number of bets on them. Although betting on a
Quarb does not guarantee you a profit, we found 136 cases (in the bookings
market) during the last two Premier League seasons. Of these, 86 would have
been winning bets and only 50 would have lost. A punter staking a modest £5
per point in each case would have won almost £5,000 over the two years.'

Obvious “Quarb” Strategy

A “Quarb” occurs in a spread betting market when one of the companies
offering a price is slightly out of sync with the other bookies. In its simplest
form the out of sync bookie needs to be quoting either a buy price the same
as one of the other bookies sell prices or visa-versa. For example Spreadex
is offering 39 – 42 for the likely number of bookings in the match (10 points for
a Yellow and 25 points for a red) and IG are quoting 42-46. In a market like
this there is obviously no over-round or under-round as you can buy with
Spreadex and sell with IG at 42.

A more complex example of a “Quarb” occurs when the best estimate of the
market matches the upper or lower end of the out of sync bookie. The
calculation of this is described in the next chapter.

When a Quarb occurs the market is considered “fair”, in that neither you nor
the bookmakers (as a whole) have an advantage. This is a good thing, and if
you know something about the market you can potentially beat the bookies.

However, if you’re probably like myself, and too lazy to study the form and not
able to make an educated guess if you tried, the above is not much use
because you still have to take a punt one way or the other.

Or do you??

For reasons that I will explain in one of the following chapters, you should
always consider selling a “Quarb” position.

“Full Quarb” Strategy

Even more help is at hand! As you will always have a number of bookmakers
quoting prices you can use their many years of expertise to work out the most
likely outcome.

Lets look at what the market thinks will be the likely number of booking points.
If we take the previous example but include all the other bookmaker’s quotes
we can work out the most likely outcome by working out the average of the
total market. The maths work like this:

Spreadex

39-42 Average = (39+42) / 2 = 40.5

Cantor

42-46 Average = (42+46) / 2 = 44

IGsport

41-45 Average = (41+45) / 2 = 43

Sporting

42-46 Average = (42+45) / 2 = 44

Sportsspread

42-46 Average = (42+46) / 2 = 44

Sum = 215.5

Average = 215.5/5 = 43.1

Therefore, using all the bookies skills, their best estimate is that there will be
43.1 points. If this best estimate figure falls outside any of the quotes in the
market we have a “Full Quarb”. In this particular example 43.1 lies outside
the Spreadex quote of 39-42 and we should buy points at 42.

What does this mean? Well if the market is right, and you would expect it to
be as the Bookies are still in business, you have effectively found an “under-
round” i.e. the book is less than 100%. In effect if you buy at 42 and the
market expects 43.1 you have a 1.1 point advantage.

Not So Obvious “Quarb” Strategy

If the best estimate of the bookies matches the top or bottom end of one of
the quotes you have a “Quarb”. In the previous chapter the Quarb was an
obvious spot, however this is not always the case.

Take the following quotes.

Spreadex

42-46 Average = (42+46) / 2 = 44

Cantor

39-43 Average = (42+46) / 2 = 41

IGsport

42-46 Average = (41+45) / 2 = 44

Sporting

41-45 Average = (41+45) / 2 = 43

Sportsspread

41-45 Average = (41+45) / 2 = 43

Sum = 215

Average = 215/5 = 43

In the above example the best Buy is at 43 and the best sell is at 42 so there
is no obvious Quarb, however the best estimate of the market is 43 which
matches the best buy quote so you have a Quarb.

Spread Betting Market Bias

Two things affect the market bias of spread betting quotes which you need to
be aware of before taking advantage of “Quarbs” or “Full Quarbs.

Sellers – The Unlimited Loss Fear
The first factor that puts a bias on the spread betting market is governed by
the punters fear of an unlimited loss. Taking the above example if you sell at
42 with Sportspread and assume there are no bookings in the match the
maximum you could expect to win is 42 times your stake. However, on the
downside, the maximum you could expect to lose has no exactly defined
upper limit. If there was a big punch up on the pitch and all the players
received red cards you would be looking at an extremely big loss. This is
particularly true in the Cricket market when you are selling runs. On the flip
side the Buyer has a known loss figure but more importantly the excitement of
having potentially an unlimited amount of profit

This seller fear and buyers greed tends to make punters buyers in a spread
betting market. In any market where there are more buyers than sellers the
market prices will go up so in this case the Bookies will always be quoting
slightly more bookings or minutes to the first goal.

The Thrill of the Game
If you are looking at the number of goals market and you know that you will be
watching the match, would you rather sit there grimacing every time anyone

has a shot on goal or would you rather sit there shouting your team on to
score more and more goals. Quite clearly you would have more enjoyment in
the later which would tend to make you a buyer of goals. As before this tends
to make the prices in the market slightly higher.

Using the “Market Bias” to your Advantage

In the previous Full Quarb example where the best estimate lied outside the
Spreadex quote the benefit would probably be marginal due to the
preponderance of buyers. However if the “Full Quarb” is on the Sell side
“FILL YOUR BOOTS”.

Likewise in a “Quarb” situation you should consider first the sell side.

Profits

In the bookings market alone Dr Paton’s and Prof. Vaughan Williams’
research found 136 “Quarb” and “Full Quarb” cases during the last two
Premier League seasons. Of these, 86 would have been winning bets and
only 50 would have lost. A punter staking a modest £5 per point in each case
would have won almost £5,000 over the two years.

Spread Betting Risk Warning

Research shows that, by betting sensibly, punters really can turn the odds in
their favour. But they should remember that spread betting is notoriously
volatile and it is possible to lose a lot of money in a short period of time.

The Arbitrage, Quarb Calculator

The programmes provided with this publication have been written to work in
Microsoft Internet Explorer. When you input the spread betting quotes in the
calculator it will tell you where the Quarbs and Full Quarbs are instantly.

On the email you received there will be an attachment that you can launch
directly from mail. However I would recommend that you save the attachment
somewhere on your PC so you can access it more easy. This will also
prevent you from deleting it from your emails.

Once you have saved it in an appropriate place you can open it manually in
Internet Explorer by clicking on “file” followed by “open”

Then use “browse” to locate the programme and click open.

©

Richard Lloyd-Henderson 2005

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