How To Use Free Bets On Internet Betting

Almost all internet gambling sites will offer a free bet when you sign up. It’s usually in the form of a deposit match, up to a set amount. For example, if you deposit $200, the bookmaker will give you an additional $200 in free bets. The upper limit to the deposit match can be as much as $500. You can find a good list of offers here (see right hand frame).

Almost all sites offer extra free bets for referring friends who end up joining. If you haven’t bet with them for a while, you’ll receive an email or text offer of more matching bonus bets if you make another deposit and bet with them again. All pretty lucrative once you know how to use them properly.

Sometimes you are required to bet the initial deposit through before receiving the free or “bonus” bets. Some sites give you the bonus straight away. That does not alter the strategy.

How do you get the most out of your free bet?

Not by just betting on a 50 / 50 outcome and hoping for the best. Nor by betting on a short priced favourite. Even if the bookmaker let you use your free bet on short odds (which they usually don’t), this is a terrible strategy, as you only receive the profit as a payout. That means you’ll convert your free bet into 10, 20 or 30% of its face value (and possibly lose). It’s possible to do much better, with certainty.

I’m going to explain how to arbitrage a free bet. That means you lay off the other side on another site in such a way that the payout is the same, regardless of the result ie. a risk free position. Because one of the two legs uses the free bet, you will be able to lock in a certain, riskless profit. It’s usually in the range 65 – 70% of the free bet amount if you’re prepared to join several sites and look for the most favourable odds.

First, I'll explain how to arbitrage by backing both outcomes on two different bookmakers. Then I'll discuss laying the free bet outcome at Betfair, which in theory is better, but in practice gives about the same result.

The basic principle is to bet your free bet on a high paying result of a two outcome event, such as a tennis, basketball or football match (not soccer – it has too many draws). In general, you want a game in which a draw is either impossible, such as tennis or highly unlikely, such as basketball, AFL, rugby league or American football. In the latter, a draw is still possible, but so unlikely that the cost of covering it is negligible.

Method 1: Backing both sides on two different bookmakers.

First we have to know the mechanics of betting payouts.

A free bet will not pay the stake if it wins. For example, if you bet $100 on a team to win at 4.00, an ordinary bet will pay $400 ie. you’ll win $300. But the bonus / free bet will pay $300, since you never put up the stake. This is important in our calculation.

Secondly, if you choose to bet on binary outcomes in games in which a draw is possible, you need to understand the dead heat rule for payouts: the payout is halved. Suppose you bet $100 on Manly (1.20) v Parramatta (5.00) on a straight win bet. Choose Manly and the win payout is $120. But if you choose Manly and the game is drawn, you would only receive $60 ie. you’d make a $40 loss. If you choose Parramatta and the game is drawn, you would only receive $250 ie. you’d make a $150 profit instead of $400 in the case of a win.

How does that work with a free bet? Remember they don’t pay you the initial stake. If you bet a $100 free bet on Parramatta at 5.00 and the game is drawn, you’ll only receive the profit ie. $150.

So, let’s use the Manly (1.20) v Parramatta (5.00) example to see the entire free bet arbitrage. We’ll suppose we’re using a $100 free bet. I’ll discuss the general formula at the end of the post.

First, bet the $100 free bet on the high paying outcome: Parramatta at 5.00. If they win, the payout will be $400. If they lose, the payout will be 0.

Now you need to bet the right amount on Manly with another site to get a payout of $400 if they win. Remember this is not a free bet, so your payout includes the initial stake. The correct amount is $400 / 1.20 = $333.33.

Now all you need to do is cover the draw. In this event, the free bet will pay out $150 and the hedge bet on Manly will pay $200. That’s $350 in total, so you’ll be $50 short if you don’t cover this option. In the actual game example I’ve used, the draw paid $34, so betting $1.50 on a draw in the margin betting will cover it.

Thus, for a total wager of $333.33 + $1.50 (call it $335), we have a guaranteed $400, whatever the outcome. That’s a riskless profit of $65.

Now I said above that you should be able to get 65 – 70% of the free bet amount. That’s true if you’re prepared to look around for the right high odds on a game where another site is paying slightly more for the favourite. For example, maybe another bookmaker has Manly at 1.21 or 1.22. The latter would give a 70% overall profit.

Betting on tennis matches can be better because you don’t need to cover the draw. However, bookmakers’ spreads on these are usually larger than football or basketball, so if you find a match paying 5.00 on the site with your free bet, it may be harder to find the opponent paying more than 1.20 somewhere else. Then again, some of my highest percentage free bet returns have been on tennis matches.

In general, suppose we find a straight win / loss bet with A wins paying p and B wins paying q, with      p < q. If we bet a $1 free bet on q, we want to know the amount x to lay off on p.

Victory for A pays p*x. Victory for B pays q – 1 for the free bet (no stake return). These have to be equal if the bet is risk free. Thus, p*x = q – 1, so x = (q – 1) / p.

In our Manly v Parramatta example above, p = 1.20, q = 5.00, so x = (5 – 1) / 1.2 = 3.3333.

Exactly the same formula works in the slight variation where the bookmaker offers a refund if your bet loses. This is essentially a free bet. Betfair does this.

Mathematically inclined readers will see that in a fair wager, the probabilities implied by the odds add to 1. That is, 1 / p + 1 / q = 1, so that the percentage riskless return = (q – 1) / q, which increases toward 100% as q gets larger. Thus, in a fair wager, you should bet your free bet on the highest payout possible.

However, in a real bet, 1 / p + 1 / q = some K > 1. That’s how the bookmaker makes a profit. The percentage riskless return = (q – 1) (1 – (K – 1) q) / q, which has a maximum value at q = 1 / √ (K – 1) and a maximum return of K – 2 √ (K – 1). 

In most win / loss wagers, you should be able to find games with K < 1.05. You can even sometimes get as low as K = 1.02. If K = 1.04, we get q = 5.00 and a maximum return of 64% of the free bet. In the Manly v Parramatta example above, K = 1.033, with a maximum possible return of 66.8% of the free bet. Note that other bookmakers paying 1.21 or 1.22 on Manly would reduce the K for our wager to about 1.02. Each bookmaker's individual K would be about 1.04 or 1.05, because someone paying 1.22 on Manly would only be paying about 4.60 on Parramatta. It's the ability to shop around for better odds on the favourite for the other side of the hedge which reduces our K. That’s why we could get a payout of 70%.

If you’re lucky enough to find a game with a 10.00 payout on one team and a = 1.01 due to odds mismatching between bookmakers, you can get a return as high as 81% of your free bet. In practice, such wagers are very hard to find, due to the way bookmakers adjust the payouts of lop-sided contests. You also need a lot of money for the hedge bet on the favourite.

Method 2: Laying the other side.

Now I'll discuss the alternative option: laying the free bet outcome at Betfair (the only site which offers this).

A lay bet is where you bet on an outcome not to happen. In our case, that would be for the side we have backed with our free bet not to win. Note that this means more than losing: a draw pays out on our lay as well, so the draw option is automatically covered.

Suppose in our example, we had used our free bet of $100 on Parramatta at 5.00. We could try and lay Parramatta on Betfair. In practice, the odds would be more like 5.50. This is because Betfair is an exchange, which makes its money matching up bids and lays and taking a commission on winnings. The value of K = 1 / p + 1 / q for games on Betfair is usually more like 1.01 than the 1.05 on other sites. The catch is that Betfair take about 5% of any profit you make, so we need to factor this into our calculation.

So, suppose you make a lay bet of $100 on Parramatta at 5.50. There is no initial outlay, but you must have the funds in your account to cover any payout you might have to make if Parramatta win. If Manly wins or the game is a draw, you get the $100. If Parramatta wins, you pay out like a bookie: $100 * (5.50 - 1) = $450.

Suppose we bet $1 of free bet on team B to win with odds q. How much should we lay on this outcome, where the odds will be Q > q?

If we lay an amount x, a win on the free bet will pay q - 1 - (Q - 1) x. A loss for team B would pay 0 for the free bet and you would keep the lay amount x, less the commission percentage, which I'll call C.

We want the win and loss amounts to be equal, so that q - 1 - (Q - 1) x = (1 - C) x, giving x = (q - 1) / (Q - C). The proportion of your free bet which can be earned risk free by using the lay bet method is then (q - 1) (1 - C) / (Q - C).

In our example, where q = 5.00, Q = 5.50 and C = 0.05, x = 0.734, so you would need to lay $73.40 for each $100 of free bet. The percentage riskless return would be 69.7%.

That looks pretty good: it's at the upper end of what's usually possible by Method 1. Note that although no initial outlay was required, you still need to deposit sufficient funds in your account to cover a payout on the lay bet, so the practical impost is about the same.

I also haven't covered the case of a drawn game. That's because it's actually in your favour if you use a lay bet. The free bet will pay out half minus the stake ($150 in the case of $100 on Parramatta at 5.00). But you'll also win with the lay bet, since you're betting on the outsider not to win. Thus, the lay bet method gives a small chance of a substantial profit from the draw. It also lets you bet on sports like soccer, since the draw is now not a problem, but a benefit. In particular, the English Premier League becomes a good option due to its liquidity, as Betfair is housed in the UK.

The formulae above imply that if using the lay bet method, we should look for games with as high a value of q as possible and this is sort of true. Generally, the longer the odds for one team, the tighter the difference in the payouts between ordinary bookmakers and Betfair's exchange. That means the difference in odds for the outsider will increase, so that the ratio of q / Q will decrease. There is a practical limit to the return of about 80%, which is about the same as in Method 1. You'll also need significantly more money in your account to cover the possible payout on the lay.

The other difference between theory and practice is that lay bets of any reasonable size on outsiders  (say, those paying 10.00 or more) are generally not available because there aren't enough takers on the other side. Laying off $75 on a $100 free bet should be feasible though. Laying off a free bet of $250 or $500 where the bookmaker requires you to use it all in one go is much less likely. So, in reality, you're probably not going to do much better that 70% using the lay method. Having said that, when available, it's usually slightly superior to Method 1.

I am reminded of a quote by that great philosopher, baseballer and commentator Yogi Berra:

      "In theory, theory and practice are the same. In practice, they are not."

What does it all mean?

In summary, the above discussion implies that in practice, you’re typically looking for games with one team paying around 4.00 to 6.00. That means for each $100 free bet you use, you’ll need as much as $500 to bet on the favourite on another site, or alternatively, to cover the lay payout on Betfair.

Method 1 is more likely to give you an actual match up of bets. If you use it, find the lowest value of K = 1 / p + 1 / q  that you can, use the formula x = (q – 1) / p for the amount of your hedge bet on the favourite and you should be able to secure a return of 65 – 70% of your free bet - don't forget to cover a draw.

Method 2, the lay bet, usually gives a slightly better return, if you can get the lay on. Try to find a game where one side is paying about 7.00 to 8.00 and there is sufficient depth in the market. This may not always be possible. If not, look for games where one side is paying around 5.00 to 6.00. Use the formula x = (q – 1) / (Q - C) for the amount of your lay bet and you should be able to secure a return of at least 70% of your free bet.The additional advantage of using a lay bet is the small chance of making a large return from a drawn game, instead of the small, additional hedging cost in Method 1.