How do players use hedge betting for risk and profit distribution? (with Examples)

January 05, 2022

What does hedging your bets mean in Sports betting?

What is hedging your bets? No matter what type of investing is done, whether it is financial or sports betting, hedge betting is a vital strategy as a way of protecting oneself from risk and ensuring that in the long run the player is securing profits from their bets. When instituted correctly, bet hedging is an excellent method used by many professional players to protect themselves from unexpected losses.

What does hedging bets mean? Ultimately, hedging bets is a form of diversifying across different outcomes than the original result a player wagered on. While there is no method that can guarantee a player profit on every wager, hedge betting is a way that players can actively limit any potential gambling losses and at the same time, protect their bankroll.

Hedging Vs. Arbitrage: What’s the difference?

Some people will point out that “hedging your bets” is similar to Arbitrage betting, and in a sense they are alike. The basic premise of both strategies is to secure a profit, albeit a smaller profit, no matter what the outcome of a game or match.

To be clear, Arbitrage betting is placing two or more wagers on multiple outcomes at different bookmakers to take advantage of the variance in the betting lines. Hedging bets on the other hand is a player taking advantage of different circumstances within the same game and can be executed with only a single bookmaker (using a single account).

How to Use Hedge Betting to Ensure Guaranteed Profits:

To maximise the chances of turning a profit, a player must be focussed and aware of all the different changes in circumstances that can surround a bet. “Hedging your bets” always requires at least one more additional bet after the original bet has been placed, so the player should always be in tune to anything that could have an effect on the game they have bet on.

“Hedging my bets” with the winner of a tournament or season is one of the more popular ways the method is used. We will get into hedging futures bets later on in the article, but for now let’s take a simple example of how hedging can be used to increase the chances of predicting the outcome of a tournament. Tennis and Golf are excellent examples of multiple day tournaments where an outright winner will always be crowned.

Let’s use Golf as an example to further understand the “hedging your bets” meaning. Say that a player wants to bet that the winner of the PGA Masters tournament this year will be Sergio Garcia whose odds are 50 to 1 or +5000 (50.00). If miraculously, Garcia makes it to the final pairing, but is up against Tiger Woods in the finals who now is +200 to win the tournament, then it is easy for the player to use the hedging bets definition strategy to hedge their Garcia bet with a Woods bet that will guarantee a profit no matter who wins the tournament.

Say the player originally played $100 on Garcia to win at +5000 and is trying to figure out how to hedge bets with Woods.

If the player is aiming to obtain the same profit, no matter the pick that wins, he needs to divide the expected return of his first ticket by the odds of the opposite pick (i.e.: $5000/2.00 = $2500):

Garcia Bet : $100 x (50.00) = Potential win of $5000.00

Woods Hedge: $2500 x (2.00) = Potential win of $5000.00

OutcomeTotal WageredOddsReturnProfit
Garcia Wins$10 + $250050.00$100 x 50.00 = $5000$2490
Woods Wins$10 + $25002.00$2500 x 2.00 = $5000$2490

The actual profit from either outcome will be (Potential Return - Total Wagered = Profit). In this case it will be ($5000 - $2510 = $2490) irregardless of if Garcia or Woods wins the finals. The profit is lower than if the player just rolled with their original bet with Garcia, but if the player hedges, the guaranteed profit of $2490 gives them peace of mind that they will turn a profit no matter what the outcome is.

Adjusted Hedge Bets: Risk Distribution Based on player’s Judgment

When you try to define hedging bets the mathematics behind the example for bet hedging that we used for the winner of the Masters tournament was sound but let’s be honest, if a player has a feeling about a bet going a certain way, they are going to make adjustments.

Let’s go back to the example of the player using hedging sports bets for his Sergio Garcia bet with the Tiger Woods bet in the finals of the Masters. If the player feels more confident in Tiger winning the finals against Garcia, they may opt to stake more on Tiger, even though it is hedge betting on their original ticket.

OutcomeTotal WageredOddsReturnProfit
Garcia Wins$10 + $350050.00$100 x 50.00 = $5000$1490
Woods Wins$10 + $35002.00$3500 x 2.00 = $7000$3490

If the player stakes $3500 on Tiger instead of $2500, the profit Tiger winning rises as well, and subsequently the profit for Garcia winning falls. The player still secures a profit no matter what the outcome of the finals, but with more confidence in Tiger winning, the player can stake more against that outcome than the original one.

When to Hedge Bets: Futures, Parlays, and Live Bets

There are a few examples in sports betting when hedge betting can be seen as being more successful and beneficial for the player. For betting futures, however, hedging bets can be seen as tremendously important, especially when placing bets on futures with very high odds. Let’s take a look at how hedging bets which are futures can profit in the long term.

Hedging Bets: Futures

Futures bets are usually placed before, at the beginning, or in the middle of a season. Traditionally the highest odds are available before the season even starts, when the team has not had anything affect it’s outlook. This makes them a perfect opportunity to hedge bets on them.

Let’s say a player believes that the San Francisco 49ers will win the Super Bowl at the end of the season. First, the player needs to actually educate themselves and believe for a fact that the 49ers even have a chance to get to the Super Bowl. If the 49ers are getting high odds but have no chance to make the playoffs, then this futures bet is pointless. For the sake of the example, let’s say the 49ers do make it all the way to the Super Bowl at the preseason odds of +4000 or (40 to 1). The player can now use hedge bets on the other team that they face in the Super Bowl, let’s say the Kansas City Chiefs, so that no matter what the outcome of the Super Bowl game, the player will make a profit.

TeamWagerOddsReturnProfit
San Francisco$100+4000 (Preseason)$ 4100$ 4000
Kansas City$2222.22+180 (Super Bowl)$ 6222.22$ 4000

This is just one example of hedging bets with futures tickes and as shown earlier, the player can stake more on the side that they believe has the edge, even if it means sacrificing some of the profits of the original bet:

TeamWagerOddsReturnProfit
San Francisco$100+4000 (Preseason)$ 4100$ 4000
Kansas City$3000+180 (Super Bowl)$ 8400$ 5400

This player believes more in Kansas City so they felt that they could stake a little more for Kansas City to win the Super Bowl, even though their original futures bet was on San Francisco. Either way, the player is making a large profit using the hedge betting technique.

Hedging Bets: Parlays

While mathematically, parlay bets are a lot less likely to hit than single bets, the allure of a bigger payout is usually too enticing for most gamblers to overlook. But besides their probability outcome parlay bets, at the right moment, present a great opportunity to hedge bets on them.

A parlay bet is a series of single bets that are linked together on the same ticket. Every bet on the ticket must win in order for the player to be able to cash out the parlay ticket.

Let’s find out how players use hedging bets on parlays tickets:

Parlay bets are common amongst new players and casual players who enjoy the chase of a single large payout. Parlays are also useful for explaining the bet hedging strategy as it is clear when the process needs to happen. Let’s take a look at an example:

 Game 1Game 2Game 3Game 4
BetLakers @ Rockets -2Bucks @ Raptors +4Jazz @ Heat -3Kings @ Nuggets -6
OutcomeWinWinWinPending

On this 4-game parlay, the player has successfully won the first 3 games on their ticket. The payout comes down to the last game. If the player placed $100 on this 4-game parlay and the payout is +2000, then the player will win $2000 if the last bet is successful. This is where the player can hedge bets on the last leg of the parlay to guarantee themselves a profit. The player has the Nuggets to cover the spread against the Kings to cash the ticket. To lock in a profit no matter what the outcome, the player can place a single bet on the opposite result, or in this case for the Nuggets NOT to cover the point spread. Making this scenario a perfect timing to apply the hedging bets technique:

ResultWagerReturnProfit
Nuggets Win (parlay)$100$2000$1900
Kings Win (hedge)$200$380$180

This is a very rudimentary way to hedge bets the last leg of the parlay. If the Nuggets cover the spread, then great, the player wins the $2000 from the parlay. If the Kings cover however, and the ticket is a loser, then the player can still make a small profit and at least recoup the original wager of $100. Whether a player wants to break even, like in this example, or wager a higher amount to potentially win more is up to the player and how risk averse they are.

Hedging Bets: Live Betting

Live betting is becoming more and more popular amongst players, especially with bookmakers being available online now and even through mobile phones. Live betting can present the perfect opportunity to hedge bets a ticket “in-game” after circumstances may have changed. During any game, the spread, totals, and moneyline odds will constantly fluctuate, depending on how the game is going. For keen players that are following a certain game, this creates edges and odds that were not available before the game started, allowing the player to create a window where they can bet on both sides. Let’s look at an example on how to use the hedging bets strategy, this time on live betting tickets:

TeamOddsWagerReturn
Green Bay Packers -3.5 -110$100$190
Pittsburgh Steelers +3.5-110$100$190

This player placed a pre-game bet on the Green Bay Packers to cover -3.5 against the Pittsburgh Steelers. As the game starts and the first quarter progresses, Pittsburgh comes out to a good start and is leading 10-0 over Green Bay. The original bet doesn’t look as strong right now, so the player takes a look at the live odds for an opportunity to hedge bets his original stake:

TeamOddsWagerReturn
Green Bay Packers +7.5 -110$100$190
Pittsburgh Steelers -7.5-110$100$190

The live spread is now Green Bay +7.5, which is a 10 point swing from where the spread started before the game. If the player still believes that the original bet is live and the Packers can come back, this would be a good opportunity to hedge bets his original Packers

live bet at +7.5, creating a 10 point window for the player to win both bets, doubling their profits. The player should have a good feel for this particular game though before engaging in live betting, as there is just as much risk in getting carried away with betting a game as it is taking place, than there is pregame.

How Bookmakers Hedge Bets:

Players aren’t the only ones who use hedging bets to protect themselves, bookmakers do it too. Bookmakers are always looking to get two-way action on their games to limit their liabilities and will take some of the funds that come in from players and use hedging bets as insurance against taking big losses if a game does not go their way.

If you are taking action and have a given liability on one side of the game, you can take some of your bankroll and place a bet on the opposite side of the game you players have chosen. For this you may want to have a regular betting account on some post-up bookmaker website.

Conclusion:

As with anything in life, there are those who are for and those who are against hedging bets in sports betting. Some players will argue to trust the judgment of the original bet and let it ride. Others are willing to forego a higher profit for a smaller one because the smaller profit is guaranteed. In the end, there is no right or wrong answer, it is completely up to the player’s preference and risk averseness when they decide whether to use hedge bets or not.

Is there a perfect time to hedge bets? Not exactly. Hedging bets is merely an option for players who wish to minimise any potential losses and guarantee themselves a smaller profit. For the long term it is absolutely a viable strategy to protect a player’s bankroll. Hedge bets is one more tool used by professionals and experienced. These players will use hedging bets in the right situation to protect themselves. Bookies also use hedge bets to their benefit and to cover their backs against heavy action in a given game. After all, the most important part of investing is alleviating risk and allowing for the clearest and safest path to profitability.