How to calculate stakes when factoring in premium charge?

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kiwidude
Posts: 8
Joined: Sat Jan 12, 2019 1:52 am

Hi guys, I'm not yet paying premium charges but I am staring down the barrel of it. I've currently traded in 180 markets and have a lifetime commission of 9.34%.

I do a lot of arbs, whilst this is meant to help keep commission generated up in the long run it doesn't seem to be enough. My question is how would I calculate my stakes if I were paying premium charge? Right now I use a lay calculator where I enter in the odds I backed, the odds I'm laying at and the lay commission. Right now that's a fixed 4.5% but if I were paying premium charge there isn't a fixed rate because if I have a losing week on betfair I might pay no premium charges but if I having a winning week the premium charges could be anywhere from an extra 1-17.5ish percent. A lot of arbs would obviously be unprofitable if I were paying big premium charges.


Lets say my lifetime commission is 10% for simplicity's sake and hypothetically every week will be exactly 10% so I'll have to pay an extra 10% commission, could I use 14.5% as the commission rate in the lay calculator (4.5% fixed commission + 10% premium charges)?

Thanks in advance.
pythonic
Posts: 65
Joined: Sun Jul 08, 2018 10:20 pm

kiwidude wrote:
Thu May 23, 2019 5:56 am

Lets say my lifetime commission is 10% for simplicity's sake and hypothetically every week will be exactly 10% so I'll have to pay an extra 10% commission, could I use 14.5% as the commission rate in the lay calculator (4.5% fixed commission + 10% premium charges)?

Thanks in advance.
No, if your long term commission on the arbs excluding the trading profits is more than 20% of total arbing profit at betfair and 20% is your PC level then the arbs reduce the total amount of PC that you pay in the long run.
In other words, you can just apply your usual commission rate for the arbs.
You could even assume a lower commission rate because the commission you pay on your arbs reduces the PC you pay on your trading.
Say your arbs break even at betfair on average *before* commission. Then the commission you pay on your arbs should be approximately equal to the amount of PC that you save which means that you could assume a 0% commission rate on your arbs (this is not strictly true due to the way lifetime commission is calculated for the PC but the principle still applies).
In the long run it is likely that your arbs are unprofitable at betfair because you are expected to win at the soft books on average.
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Derek27
Posts: 23477
Joined: Wed Aug 30, 2017 11:44 am
Location: UK

Don't forget that premium charge is 20% - implied commission, not commission paid.

I treat PC on winning markets as: profit * (0.2 - (commission rate / 2)), and losses are: -loss * 0.215
pythonic
Posts: 65
Joined: Sun Jul 08, 2018 10:20 pm

Yes, that was what I was refering to above.
My point was, it doesnt make sense to deduct the PC from the winning bets when calculating profitability of arbs, unless the arbs are constantly very profitable on the betfair side of the arbs, which is very unlikely.
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