The central idea
Theoretical arbitrage exists when reciprocal probabilities across every mutually exclusive outcome add to less than 100%.
Arbitrage condition: Σ(1 ÷ odds) < 1
Worked example
Two opposite outcomes priced at 2.10 each total 95.24%. Splitting a 100-unit budget equally targets a 105-unit return for either result before costs.
Limits of the calculation
Prices can move before every stake is placed. Limits, fees, different void rules and account restrictions can remove an apparent return.