What Does It Mean To Hedge A Bet
Sep 11, 2007 You bet 100 to win 1,000 on a 4 team parlay, the first 3 win, and you decide to hedge the last game. The last game is Miami vs Philly and the line is the same as when you bet it, Philly is -3. The Hedging Technique: A Betting Strategy for Risk Management It’s likely that you’ve used the phrase “hedging your bets” at some point in your life. At the very least you’ve surely heard the phrase before, or some version of it. This is a widely used phrase, and not just in the context of sports betting.
WHAT IS HEDGING A BET? The origin of the phrase “hedging a bet” came from an actual hedge, which is a fence or boundary that encloses a piece of land. The hedge, which determines an area’s limits, inspired the idea of limited risk. It also gave rise to the phrase “hedging your bets,” a strategy to reduce one’s wager risks. May 29, 2020 Simply stated, hedge betting is placing a wager on the opposite side of an existing bet. Played regularly by some, and rarely by others, the value of hedge bets differs from player to player. Definition of hedge one's bets: to do things that will prevent great loss or failure if future events do not happen as one plans or hopes They decided to hedge their bets by putting half their money in stocks and the other half in bonds. Learn More about hedge one's bets Share hedge one's bets.
“Hedge your bets!” It’s a cliché phrase that you’ve probably heard a time or two, but did you know that it actually has some real relevance in a profitable sports betting strategy? In this guide, we’re going to talk about what it means to hedge your bets, when you should look to do it, and some tips to make sure you’re doing it properly.
What does hedging your bets mean?
What Does It Mean To Hedge A Bet
So, what exactly does it mean to hedge your bets? Hedging your bets is when you choose to bet against yourself in order to lock up guaranteed profit. It does lower the total amount that you can win, but it mitigates a lot of the risk. It’s effectively your way to buy low and sell high, cashing in on a betting ticket before the contest has been decided.
For example, let’s say that you placed a $100 futures bet on the Dolphins to win the Super Bowl at 20 to 1. Let’s say that your bet looks to be a pretty wise one as the Dolphins have made it to the Super Bowl against the Atlanta Falcons. But, you haven’t made any money yet because your bet was on them winning the Super Bowl. If they beat the Falcons, you’ll get $2000 in profit! But, if they lose you’re going to get $0.
Now, if you want to, you can totally do nothing and watch the game and hope for the Dolphins to pull it off. But, let’s say that you want to lock up some of that profit. You’re okay with not making the full $2000 if it ensures that you’re going to get some money. This is a spot where you would hedge your bets.
The way you would do this is by placing a bet against yourself. This will make a lot more sense as we continue the example. Here are the odds on this fictitious Super Bowl for each team to win the game. These are the odds that came out at the end of the playoffs right before the game.
- Dolphins -150
- Falcons +160
What you could do to hedge is bet $625 on the Falcons to win the game. Yes, this sounds counterintuitive, but let’s run the scenarios.
If the Dolphins win, you’ll get paid $2,000 on your initial futures bet. But, you’ll lose $625 on your Falcons bet. So, you’ll end up with a profit of $1375. If the Falcons win, you’ll lose your initial futures bet for a loss of ($100). But, you’ll win your Falcons bet which will pay $1,000 in profit. Subtract out the $100 you lost on the futures bet, and you have a profit of $900.
So, no matter who wins the game, you’re going to make money! If the Dolphins win, you make $1375 and if the Falcons win you make $900. There is literally no way that you can lose money now. Now, it’s up to you how much you want to hedge for. You could always bet less if you still wanted to gamble some and though the Dolphins were going to win the game. Or, you could bet more if you wanted to even things out where the game doesn’t even matter, or you could bet even more if you think the Falcons are going to win.
That is hedging. Because your bet has much more value now, you’re able to use bets against yourself to lock up profit. You can hedge a futures at any point in the process where the number of teams or entrants has been significantly lowered, and you want to lock up a profit. We’ll look at this in more detail in a later section. We’ll also look at some other times that you can hedge your bets.
Should I hedge my bets?
This begs the question of whether or not you should be hedging your bets. The answer is that it’s completely up to you. When you hedge, you are giving up some of your value and potential profits if you were correct in your initial prediction. But, it does help you to lock up some profits which people with a lower variance approach really enjoy.
Especially with huge underdog bets, you’re going to have way more money on the line effectively than you’re probably comfortable with. Take our earlier example about the $100 bet on the Dolphins to win the Super Bowl. You bet $100 on that to happen. But, when it gets down to the Super Bowl, you’re still only in for $100, but you effectively have $2,000 riding on that game. Most people are not going to be comfortable taking that sort of risk, so they choose to hedge.
What we recommend for people to do is to keep in mind that hedging exists. If you get close to winning a bigger bet, run the numbers and see what your options are. If the guaranteed money that you can lock up looks great, then go for it. If you’re okay with leaving things as is and letting your initial bet ride, then that’s okay too.
Just make sure that you’re away hedging does not give you any magical odds or conjure up some free money out of nowhere. All it does is allow you to mitigate some risk and variance and lock up some profit earlier in the process. The trade-off is some of the value if you were right on your bet. It doesn’t feel that great when your bet comes through on its own, but it feels incredible when your bet would have lost and you were able to still get some money out of it.
When You Should Look to Hedge
What we’d like to do now is explore some of the different opportunities where hedging might be in your best interest. Please remember that hedging is something that is purely a preference choice and it does not increase your chances of winning or create some magical money out of thin air.
That being said again, there are a lot of different opportunities that will present themselves where you could look to hedge. The two most prominent that we’re going to look at are with futures bets and in-game bets.
Futures Bet Hedging
We’ve already covered one example of a futures bet hedge in our previous Dolphins and Falcons example. But, pretty much with any futures bet you can look to hedge if you’re getting close to the time when the bet will be decided. You couldn’t start hedging at soon as the playoffs started as there are just too many teams still in and you’d have to give up an absurd amount of your profits if not all of them to cover all the outcomes.
But, as the number of teams or entrants in a bet start to dwindle, the amount of potential profit you can lock up starts to increase. For example, you could have hedged that Dolphins bet when they were playing the AFC and NFC championship games. Let’s say the Dolphins were playing the Kansas City Chiefs in the AFC title game. Effectively at this point, there are four teams that can win the Super Bowl – the Dolphins, the Chiefs, the Falcons, and whoever the Falcons are playing.
What you could do if you wanted to hedge at this point is start by placing a bet on Chiefs to win the AFC title game. Let’s say that the Chiefs and the Dolphins are even money to win the AFC title game. If you were to bet $500 on the Chiefs to win the game, here are the different outcomes. If the Chiefs win the game, you’re up $500, and your futures bet is done. You end with a nice profit of $400 after you subtract out the $100 for your futures bet.
If the Dolphins win, you’d lose $500, but your futures bet would still be alive. You would then need to place another hedge on the Falcons after they win the NFC title game to win the Super Bowl. But, make sure you remember that you already gave up $500 of your hedge to the Chiefs game. So now, you’ll want to make a smaller bet to lock up some of the remaining profit.
Remember, the odds for that Super Bowl game were the following:
- Dolphins -150
- Falcons +160
Let’s say that you decide to bet $800 on the Falcons as a hedge.
If the Dolphins were to win the game, you’d get paid $2,000 on your futures bet. But, you’d first have to subtract out the $500 you lost on the Chiefs and the $800 you bet on the Falcons, giving you a final profit of $700. If the Falcons were to win the game, you’d get $1280 in profit from that bet, nothing on your futures bet (losing $100), and still be out the $500 you bet on the Chiefs. This would give you a final profit of $680.
So, no matter who ends up winning, you’re going to walk away with money. If the Chiefs win, you’re up $400. If the Dolphins win, you’re up $700. If the Falcons win, you’re up $600. Again, you can move the numbers around to even out these numbers or you can adjust them based on what you think is going to happen.
You’ll notice that it’s not the same amount of money on either side as when we ran the first example in an earlier section where you’d get $1375 or $900 in profit. But, this is because in this example you chose to hedge when there were four teams left and not just two.
The more chances you have to lose, the more teams you’re going to have to hedge against which means the more profit you will have to give up to lock up a win. There is no right time for you to do this. It’s completely up to your risk profile and what you think is going to happen.
In-Game Hedges
Another opportunity you will have to hedge is with in-game betting after you’ve made a bet on the game prior to it beginning. Again, this is a way to lock up profits when things are going your way. Let’s take a look at an example to show you what we mean.
Let’s say you place a $50 bet on a baseball game for the Astros to win. Here are the odds on that game to begin with.
- Astros +130
- Brewers -140
If the Astros win the game, you’ll walk away with a profit of $65.
Now, let’s say the game starts and the Astros go up 4-0 in the 5th inning. If you have access to in-game betting, the moneyline wager will most likely shift heavily making the Astros the favorites and the Brewers a big underdog. The odds might look something like this at the end of the 5th inning.
- Astros -630
- Brewers +700
This would be a great spot for you to hedge our bets if you wanted to lock up some profit. Let’s say you decide to bet $15 on the Brewers in game. You now have guaranteed yourself a profit. If the Astros continue on and win, you’ll get $65 for your initial bet but lose $15 on your hedge for a profit of $50. If the Brewers make a big comeback and win, you’ll get $105 for your in-game bet and lose $50 from your initial bet before the game for a final profit of $55.
So, regardless of who wins the game now, you’re walking away with $50 or $55 in profit. In game hedges are typically going to be smaller than your futures hedges, but they can have the exact same effect of lowering variance and locking up wins. It gives you a way to “sell high” with your bets.
Tips for Hedging Your Bets Properly and Profitably
If you’ve gotten this far in the guide, it’s probably safe to assume that you’ve decided hedging your bets is something that you want to include in your arsenal. It’s not something that you just run out and say, “Alright, let’s do some hedging!” but it is something that you want to be prepared for when opportunities present themselves.
To help you protect yourself from making any costly mistakes and ensure you lock up the most profits, we wanted to give you some tips. These tips are crucial to the proper employment of this strategy, so make sure you pay attention if this is something that you could see yourself doing in the future.
Have a Hedging Plan in Mind Before the Initial Bet
Most of the time that people end up hedging is when they get close to winning a bet that they didn’t think they had a shot to win. For example, when someone makes the crazy futures bet or wild underdog bet that they think has no shot to win, but they wanted to bet on it anyways more for fun. In these situations, people can start to panic as they try to figure out what to do.
We bet that a lot of people reading this guide right now are in that situation. If that’s you, that’s okay. You’re not alone. But, for future reference and for those of you who are here in preparation for betting, you should always have a general hedging plan in mind before you make a bet.
For example, if you make that football futures bet we talked about earlier, you should have a general idea of whether or not you’d want to hedge and at what point you would want to do it. That way when you get close to winning, you aren’t stumbling around trying to figure out what you want to do. You’ll at least have a general idea of the direction that you want to go with things.
It’s okay to decide to hedge on the fly, but it’s a whole lot easier if you have a plan in place.
Prepare for the Logistics
If you haven’t noticed, hedging requires you to have additional funds that you can bet with. If you’re hedging against a huge underdog futures bet, you might have to have a lot of funds available to pull this off. This is something that you need to think about and should be included in that general hedging plan that we were just talking about.
In our $100 bet example from earlier, you’d need over $1,000 to properly hedge. For some people, this sort of money is just not available. We’re not going to tell you what you should or should not do about it, but you need to prepare ahead of time if you’re going to be hedging. Technically it won’t be betting with money that you can’t lose because you are locking up profits, but you still want to be careful. If you do borrow money from a friend or another source other than yourself, make sure you take the next two tips to heart.
Triple Check Your Math
Make sure that you double and triple check your math when you get ready to hedge. If you make a mistake in a calculation, it could get really expensive fast with money that you’re not prepared to lose. The best way to do this is run every scenario and ensure that you’re not missing anything. You can even walk yourself through each step and calculate the money as you go.
Hedging is not super complicated when it’s just for two teams or outcomes, but when you start looking at more options, the math will get a little more confusing. Just look at the two examples we provided for you above with our Dolphins futures bet. When we were only hedging on one game, the math was fairly simple. But, when we start hedging with four teams left, the math started to get a little dicier.
It’s easy math, but it’s easy to make a mistake. Take the time to make sure that you have everything correct before you pull the trigger on a hedge. We also recommend that if you have a friend who is good with math or sports betting, have them double check your numbers and your thought process. The more eyes you can get on it, the better.
Triple Check the Parameters of Both Bets
In addition to checking your math, you need to double and triple check the parameters of each bet. Are you 100% positive of what needs to happen for you to win your initial bet? Additionally, are you 100% sure that you’re making the correct hedge against your other bet? If you are not 100% sure on both of these, then you need to get help from someone who can break things down for you.
We have heard a few horror stories from bettors who thought they were hedging correctly only to find out they hedged the wrong bet or their initial bet was not what they thought it was. For example, let’s say that you do a F1 futures bet on the driver’s championship. Let’s say that the driver you bet was a huge underdog when you made the bet, so you stand to make a killing if they pull off the win.
Let’s also say that the driver’s championship is just down to the driver you bet and one other driver. Well, this could be a great opportunity to hedge against your initial bet. But, what happens if you accidentally bet on the owner’s championship and not the driver’s championship? If you make a huge bet as a hedge, you could just be making a totally crazy bet that has no hedge to it all.
Mistakes like this have and do happen. It would only take you all of 30 seconds to double check that the bet you thought you made months ago is still the correct bet that you’re hedging against. 99% of the time you’re going to have made the right bet. But, that one time that you catch a mistake could be huge especially if your hedge is going to be a huge bet.
If you think winning a 10-team parlay is a dream come true for most bettors, you would be spot on. However, the chances of that happening are slim to none, making it not a very realistic goal for serious bettors to reach. The dream scenario for most bettors is to find themselves in a position where they are guaranteed a profit regardless of what actually happens in a game they bet on. When a bettor has a chance to 'hedge' their bets and turn a profit, they can consider the time spent handicapping well worth the investment.
What Does It Mean to Hedge a Bet?
When you hear someone use the phrase 'hedging a bet,' they are referring one of two definitions. The first is a situation where a bettor would cover their tracks and place a wager on the opposite team in order to limit how exposed they are in a particular game. Let's jump right into an example to help explain.
Let's say you decide to bet the NBA's Bucks at -140 on the moneyline but during pre-game warmups, Giannis Antetokounmpo suffers an ankle injury and is no longer able to play. Instead of letting your original bet play out and test your luck with the likes of the Bucks' supporting cast, you would bet on their opponent, the Raptors, at +130 for the same amount as your original bet. So now you're left with a win-win situation, in which the only risk you have is the vig on your bet .
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Why Would a Bettor Hedge a Bet?
What Does It Mean To Hedge A Bet Money
When you make a bet of any kind, you are exposed. You are exposed to the potential loss of the amount that you have wagered on one or multiple games. But this is what gambling is - it's exposing your bankroll in order to see a return on your investment. However, situations do arise where a bettor is no longer comfortable with how exposed they are on a certain game. Something about the game has changed - perhaps the weather has worsened, or maybe a key player has been injured in the pregame warmup. Maybe you bet early and since placing your bet the coach has been fired or there has been a suspension handed out or there were travel issues. Whatever the case may be, a bettor will hedge their bet in order to limit the damage to their bankroll should things go sour between the time they place the bet and the time the game actually starts. This is damage control.
The second definition of 'hedging' is a situation where a bettor can guarantee themselves a profit. This is done almost exclusively when a bettor has a solid future bet in place that has the potential to win. Let's say, for example, you bet $100 on the Los Angeles Dodgers to win the World Series at 12/1 before the season started. If the Dodgers make the World Series, you have two options. You could let your $100 bet ride and stand to win $1200 or you can bet on their opponent, the Red Sox, at +150 to win the Series. Let's say you bet $600 on the Red Sox and if they win, you would win $900 and lose the original $100 you bet on the Dodgers for a profit of $800. If the Dodgers were to pull off the victory, you would lose that $600 bet on the Sox, but make $1200, for a profit of $600. This is a perfect scenario where you can ensure yourself a small profit rather than nothing at all.
Advantages and Disadvantages of Hedging
Both the advantages and disadvantages of hedging your bet is really straight-forward. The main advantage of this strategy is that it offers the bettor a great deal of flexibility in managing the level of risk you are exposed to. If you are extremely close to landing a big payout via parlay, hedging affords you the opportunity to play it safe and ensure a profit is guaranteed. Furthermore, if you stand to make a loss on a wager and no longer want that exposure, you can hedge and reduce the number of units that will be lost.
The disadvantages of hedging are kind of hidden in the fact that just because you have the ability to reduce a potential loss, you are still guaranteed to take that loss. Just because you hedge and take a small win, you are still sacrificing the potential profit from the original wager. Using hedging to guarantee profits also has an associated cost as you are effectively paying a premium from your potential profits to cover the other side of your wagers.
How to Hedge a Parlay Bet
If you are a parlay player, there is a scenario where 'hedging' could be used to lock in a profit at the tail end of a parlay. Let's say you bet a five-team parlay and the first four games have won. Instead of sweating out that final west-coast game between the A's and Mariners, you could simply make a bet on the other team in the final game of your parlay. By making an aggressive enough bet, you could make it so that your winnings would be the same regardless of the actual result. If the payout of your original parlay isn't large enough to consider 'hedging your bet', then you have to wonder if this kind of bet is a bet you should have made in the first place, given what we know about true odds.
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