The practice of gambling is inherently risky, with the possibility of losing everything you stake hanging over your head like a financial sword of Damocles. However, hedging bets helps reduce exposure and acts as a safety net. It can either reduce the liability in a bet or guarantee a profit.
However, it isn’t always a good decision, so you have to decide when it is the right option. Also, you must ignore a bookmaker’s ‘cash out’ option, as it represents bad value. This article explores the process of hedging sports bets, analyzes the downsides, offers tips, and advises when it is best to include ‘cover’ in your betting.
When you place a bet, and the odds become shorter than when you originally bet on it, you’re in a position of strength. Hedging involves placing a second bet against your initial wager, to either decrease the amount of money you risk or to ensure a profit.
Even if you believe there’s a decent chance of winning, you might decide to hedge to play it safe and earn money regardless of the outcome. You can do this with most wagers, although hedging futures bets is one of the most popular pursuits.
Here are three scenarios where hedging your bets may prove a wise move.
You bet $10,000 on Manchester City to win the league at the start of the season at odds of 1.80. You believe that the Citizens will get off to their usual strong start. You’re correct in this case; their odds drop to just 1.40.
However, you’re concerned that Arsenal are beginning to show signs of embarking on a long winning streak and still represent value at odds of 3.00. Furthermore, City lost Rodri, one of their most important players, to a long-term injury. You believe there are no other realistic contenders to Manchester City, so your hedging option involves betting on Arsenal.
In this instance, as you place a huge bet, you want to eliminate your liability, effectively giving you a free wager. This is how you go about the process.
Typically, when someone looks to hedge a futures bet, they do so after originally backing an outcome at long odds.
You bet $100 on the Jacksonville Jaguars to win the Super Bowl at the start of the season at odds of 101.00. The Jags make the playoffs but remain outsiders. However, led by Trevor Lawrence at QB, the Jags shockingly make the Super Bowl and face the Philadelphia Eagles.
The bookies place Jacksonville as the underdogs, with Philadelphia available at odds of 1.50 to win the game. You’re concerned that the Jaguars are tired and the Eagles, as the fresher side, will take advantage. Therefore, you want to hedge your bets to guarantee the same return regardless of who wins. This is how you do it.
One of the most common hedging bets strategies involves the in-play market. Bettors who know how to read a given sport can profit significantly.
It is the Champions League round of 16 first-leg match between Liverpool and Real Madrid at Anfield. You’re surprised that Liverpool is available at odds of 2.80 to win the match and believe the bookmakers are reading too much into the home team’s league form. In recent times, Liverpool’s Anfield record in European ties has been remarkable, and you’re confident they will rise to the occasion.
After placing a $200 bet at 2.80, you watch with great satisfaction as Liverpool starts quickly and race into a 2-0 lead after 20 minutes. The score remains the same until the 70th minute, when Real Madrid pulls a goal back. Liverpool are clearly tiring, and Madrid looks increasingly likely to equalize.
With three minutes of normal time remaining, the odds on Double Chance (Madrid to win or draw in this case) are 5.00. As plenty of money is on the line, you elect to hedge your bets by risking $110 on Double Chance. Here is the state of play at this point:
The guarantee of a profit or a reduction in liability are solid reasons for placing a cover bet. However, hedging sports bets isn’t always the best option, as the following downsides illustrate.
Since you’re placing a second wager that contradicts your original bet, you guarantee a loss and a win because it is impossible for both outcomes to occur simultaneously.
In our example above, you bet on Liverpool to beat Real Madrid. Then you hedged by backing Double Chance. There is no way for Liverpool to win the game AND Real Madrid to win or get a draw too!
The hedging process technically costs you money since the value of a successful outcome falls. Suppose you bet $100 on the Buffalo Bills to win the Super Bowl at odds of 12.00 at the start of the season. The Bills play the San Francisco 49ers in the big game. You hedge your bets by placing $600 on the Niners to win at odds of 2.00.
In this case, your original bet meant you could win $1,200 for a profit of $1,100. Now, your profit is $500, regardless of who wins. If the Bills triumph, part of you will regret hedging your bets, even though it was arguably a good decision.
Cashing out a bet is becoming an increasingly popular method of hedging. After all, it enables you to add the money to your account balance immediately and ensures you don’t need to stake any additional money.
However, bookmakers introduced the cash-out option for one reason: to increase their profit margins. You’ll often find that bookies offer bad value cash outs compared to the profit earned via traditional hedging.
Here is a prime example from an unnamed fiat-accepting bookmaker, which generally provides appalling value for cash-out bets.
The following screenshots illustrate the edge this bookie takes with cash-out wagers.
The €10 bet on over 8.5 goals at odds of 1.83 could yield a return of €18.30. I placed the bet when the score was 3-3. The home team scored to make it 4-3 a few minutes later. At this point, I expected a profitable cash-out option. Instead, I was dismayed that the bookie offered €8.42, less than the value of my original wager!
I decided to see the odds for under 8.5 goals in the event I wanted to hedge. The available odds were 3.10. Therefore, I could hedge by betting €5.90 on that wager. This would mean the following:
Therefore, a ‘fair’ cash out is €12.39, NOT the dreadful €8.42 offer!
There are typically two main reasons why you should consider hedging your bets. First, you’re happy with a guaranteed profit. Consequently, you want to cash in, forget about the outcome, or enjoy the rest of the event.
The second reason is to alleviate a growing discomfort with your total liability on the bet. For example, if you’ve risked $1,000 and can guarantee a return of $2,000, thoughts of what would happen if you lost your original bet, along with the bigger hedging return, may cause you to reconsider your position.
However, there are other reasons why you might elect to hedge.
Thus far, every hedging bets example we showed led to breakeven at worst. However, you can also hedge your bets to minimize your losses. A sensible bettor knows when to get out of a wager before it is too late.
Let’s say you bet $100 on Paris Saint Germain to beat Bayern Munich in the Champions League at odds of 2.00. However, it becomes clear that the German champions are the superior side within the opening half an hour. At this point, you can back Bayern on the Double Chance market at odds of 1.66.
By putting $120 on Double Chance at these odds, you get a guaranteed return of $199.20. If PSG wins, you receive $200. In this case, you minimize your loss to $20.80 instead of the $100 you’ll lose if you let the bet ride and PSG fails to win.
There is a mathematical slant to a hedging decision too. You need to consider how much you’ll win relative to your bankroll, not to mention the percentage of your bankroll you’re risking with the wager. It is worth calculating the true probability of the bet winning and the amount you’ll sacrifice with a hedge.
For instance, if you irresponsibly bet 10% of your bankroll on a single wager, you should immediately consider hedging your bets when it becomes profitable. This is mainly because of how much you stand to lose. It is less risky if you stake just 1% of your bankroll.
If the possible win adds 50% to your bankroll while a hedge decreases profitability to 15%, you may want to ‘let it ride.’
Then there is the small matter of expected value. Suppose you wager $100 on an outcome at odds of 3.00 and have a hedging opportunity that ensures a guaranteed return of $200 no matter the outcome. This is the equivalent of winning at odds of 2.00. If you think the percentage chance of your original bet winning is less than 50%, the hedge is worthwhile as it offers a positive expected value.
It is also a situation-specific decision. Perhaps the team you backed on the Moneyline is showing signs of weakening in play. PSG starting poorly against Bayern Munich is a prime example.
Alternatively, the team you bet on in the futures market might suffer a slump in form or have lost key players to injury. At this stage, you may decide that it is best to hedge your bets for a profit or even a small loss.
You can also hedge parlay bets. Perhaps the first four legs of a five-team parlay have won. Now you’re getting cold feet and want to bet against the last team. By doing so, you can guarantee a reasonable profit. Quite why you would place a five-bet parlay when you know you’re likely to cash out if the first four legs win is another matter!
There are plenty of hedging bets strategies, and you should follow these tips to make the most out of whichever ones you choose.
If you prefer to keep your bankroll ticking over, hedging is ideal. It enables you to guarantee a profit from a wager but also eliminates the possibility of losing. If your bet looks likely to lose, hedging your bets ensures that you don’t lose your entire stake.
However, looking for cover in sports betting also reduces your potential profit. Indeed, it guarantees that one of the wagers you place will lose to ensure the other one wins.
Ultimately, hedging bets is very much a case of risk versus reward. Are you psychologically prepared to lose your full bet, or does the thought of giving up a percentage disturb you? Hedging should never be an automatic decision; it is best to decide on a case-by-case basis.
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