What is hedging a bet? And how do I hedge my bets? We’re here to uncover all associate with hedge betting.
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Picture this: your alma mater just qualified for March Madness for the first time in history, but the small conference champions are immediately an afterthought with 1,000:1 odds to win the NCAA title.
To make things interesting, you throw $100 on them to win it all, hoping to make the tournament a little more exciting.
Well, imagine the excitement when they make it through the first two weekends and advance to the Final Four! You’re dreaming of a $100,000 payday… until it all comes crashing down in the semifinal game against Kentucky, Duke, or some similar powerhouse.
You’re out $100, which isn’t too bad, but you were SO close to that $100,000! It doesn’t seem fair to walk away empty handed!
Good news – you don’t have to go home with nothing! Welcome to bet hedging.
What Does It Mean to Hedge a Bet?
So, it is obviously important to first discover what is hedging a bet?
“Hedge your bets” is one of those terms where the idiomatic meaning is better known than the literal meaning.
An online dictionary defines the term as “to do things that will prevent great loss or failure if future events do not happen as one plans or hopes”.
In sports wagering, the idea of hedging comes from a similar principle – taking the opposite side of the bet when the original bet appears MORE likely to win.
If that sounds strange, let’s take the example above. If your longshot alma mater loses the first game of March Madness by 25 points, well, you’re out $100. But as they advance through two, three, four rounds of the tournament, you start to feel you should be rewarded for the bet you’ve placed. But a futures bet is all or nothing.
How Does Hedging Bets Work?
Before the semifinal matchup with the national powerhouse, even the hot streak isn’t enough to make your alma mater a favorite, and you find Kentucky a -250 favorite on the money line. (Remember, you only care if they WIN the game; don’t worry about the point spread.)
There are all sorts of mathematical formulas that will show you how to calculate the best way to hedge your bet at this point, so let’s try to simplify. A -250 line implies a likelihood just over 70 percent that Kentucky will win. If this sounds right to you, you take a fraction of what you’d win from the original bet ($100,000) – say 10 percent – and risk it on the Kentucky money line.
If Kentucky Wins?
So, if Kentucky wins, you’ve risked $10,000 to win $4,000, minus your original $100 bet… you walk away with $3,900. It’s not $100,000, but it’s a decent return on a $100 investment.
But if your Alma Mater Advances?
Well, now you’re a game away from $90,000 ($100,000 from your original bet, minus the $10,000 loss on Kentucky). In our scenario, the last upset got your school some more respect from the oddsmakers, and now the opposing team (let’s say Duke) is only a -150 money line favorite. So let’s say you risk another $30,000 to win $20,000.
If your alma mater wins: $60,000 profit ($100,000 win minus $40,000 losses on Kentucky and Duke)
If Duke wins: $9,900 profit ($20,000 win minus $10,100 losses on Kentucky and your school)
The above example should not be taken as strategic advice on hedging – it’s simply used to show how it works. A $100 bet that leaves you within two games of a $100,000 payday deserves some type of reward, and this is a way to guarantee a tidy profit regardless of the outcome.
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When Do I Hedge My Bets?
The advent of live betting has changed the algebra on this question. In our above example, Kentucky was a hefty money-line favorite before the imaginary Final Four matchup. But what if your alma mater starts with a 10-2 lead? Or what if the game’s tied at halftime? Chances are you could get Kentucky at a much friendlier price, allowing you to maximize your profits if you hedge.
Then there’s the best-case scenario. Imagine the final game vs. Duke sees your school jump out early and take an eight-point lead into halftime. Now the oddsmakers are hedging THEIR bets, and the halftime line is Duke +4.5 at -110 odds for the game.
Time to Place your Bet…
You place your ‘hedge’ bet (say, $22,000 to win $20,000) on Duke +4.5. If the Blue Devils come back and win the game, you make $19,900. BUT – let’s say your alma mater wins the game and national title by a score of 65-62.
- Your $100 bet at 1,000:1 odds hits: you profit $100,000.
- Your $22,000 Duke +4.5 bet at -110 odds hits: you profit $20,000.
- Total Profit: $120,000
Again, it’s an extreme example. No 1,000:1 shot has ever won an NCAA Tournament. The closest scenario was in 2006, when 400:1 shot George Mason University advanced to the Final Four before losing to eventual champion Florida.
In the sports wagering timeline, 2006 may as well be the Dark Ages at this point, so there’s only one available tale of a bettor who was astute enough take George Mason at those odds – and he wagered $20 to win $8,000.
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No word on whether or not he hedged his bet. Or if he even knew what is hedging a bet?! But if it ever happens again – now he’ll know how!
Single Game Bet Hedging?
Yes, you can hedge bets within a single game as well, but it requires a different strategy and liberal utilization of live betting options. In fact, the particulars are best saved for another article, but the same general principles remain:
- Your original bet offers a high payout (say a +500 moneyline)
- The odds you take are as good or better than your perceived probability of the event occurring (example: if your team is leading by ten points with a minute to play, you wouldn’t take even odds on the other side just to ‘protect’ yourself)
- Make sure to guarantee a profit either way
Bet hedging can be involved and a little complicated to learn and understand. But following these three primary guidelines (especially the last one) should put you on the road to ensuring you don’t walk away empty-handed after a particularly smart (or lucky!) wager.