Hedge Betting Explained

• As the game neared, though, you became less certain that the Yankees were going to win. You could hedge that bet by betting on the Red Sox at +100, and you could do it in a number of ways. If you bet the same amount of money on the Red Sox as you bet on the Yankees then your only risk would be the juice you would have to pay if the Yankees won.
• Hedge funds are private investment funds with a reputation for using high-risk tactics such as leveraging and short-selling the market to make money.
• To calculate a back to lay hedge bet is fairly simple. As an example let’s say you have bet £20 on Leeds United to beat Burton Albion at odds of 1.55. During the game, Leeds take an early lead. You know they have a poor record of keeping leads this season so decide you want to hedge your bet with the lay odds now at 1.33. Calculating how.
• The term 'Hedging Your Bets' or Hedge Betting basically involves placing multiple bets within the same market on various potential outcomes, taking advantage of variations across the market. This technique acts as an insurance mechanism when done correctly, and can minimise and potentially eliminate the chance of losing, with the bettor able to.

Hedge betting is a sports betting strategy that most bettors
are at least vaguely aware of. This doesn’t mean that they all
fully understand how to use it effectively or that they
know why and when they should consider hedging a bet. As a
result, the strategy is often used incorrectly or for the wrong
reasons.

The purpose of this article is to provide some clarity on
exactly what the hedge betting strategy is all about. We’ll
explain the fundamental concept and look at why it’s a strategy
worth considering. We’ll also provide some examples of when it
can be used, and why, and look at its advantages and
disadvantages. We’ll provide some helpful tips for using the
strategy too.

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Hedge betting is often confused with arbitrage betting. There are similarities between these two
strategies in that they can both involve betting on all outcomes of the same event, but they are used in
different ways and for different reasons. We’ll briefly cover the difference between the two strategies
in this article, and we’ve also written an article that offers a detailed explanation of how arbitrage
betting works.

The Basics of Hedge Betting

The best way to view hedge betting is to think of it as a
form of insurance. It’s actually a relatively straightforward
strategy at its core, with the basic idea being to protect
existing bets against potential losses. This is done by betting
on outcomes that are different to the original wager. For
example, you could bet on the favorite to win an upcoming
football match having already bet on the underdog to win.

On the face of it this doesn’t seem like a very sensible
thing to do, as betting on both teams to win a football match
will usually result in a guaranteed loss. There are, however,
some situations when hedging a bet makes a great deal of sense.
The strategy can be used to reduce risk that you may no longer
wish to be exposed to, and in certain circumstances can even be
used to guarantee profits.

The Difference Between Hedge Betting and Arbitrage Betting

The primary difference between hedge betting and arbitrage betting is the way in which
the two strategies are used. Arbitrage betting involves placing two or more wagers on
different outcomes simultaneously. It can be used only when a discrepancy between the
odds being offered by different bookmakers creates the right kind of opportunity. Its
purpose is solely to guarantee profits based on that discrepancy.

In contrast, hedge betting involves placing additional wagers on a different outcome
or outcomes subsequent to an original wager being placed. The strategy is usually used
following some kind of change in circumstance. Its purpose, as we’ve already discussed,
is to either reduce risk or guarantee profits.

Why Use Hedge Betting?

Before you think about using the hedge betting strategy, you
should understand why it can be beneficial to do so. We’ve
mentioned how it can be used to reduce risks or guarantee
profits, so let’s explore these two reasons in some more detail.

Hedge Betting to Reduce Risk

Hedge betting to reduce risk typically involves taking a
small guaranteed loss to avoid the possibility of making a
larger loss. There are a few reasons why you might want to do
this, with the most common being that you have placed a wager
and no longer have any confidence in it winning. This can be due
to simply having doubts about why you placed the wager in the
first place, or something could happen to affect your views on
the chances of it winning.

For example, let’s say you placed a $100 point spread wager
on the Tennessee Titans for an upcoming football match against
the Tampa Bay Buccaneers. At some point before the game starts
you have a change of heart about the bet, and no longer want to
be exposed to the potential $100 loss. Maybe the quarterback has
just got injured, or maybe your instinct is telling you that you
made a bad bet in the first place.

Rather than let the bet ride, you could choose to hedge it by
placing a $100 point spread wager on the Buccaneers too.
Assuming the line hasn’t moved, one of the two wagers is
guaranteed to win. You’ll lose a little bit of money as the odds
for both bets will both be just below evens, but your loss will
only be a fraction of the $100 you were originally exposed too.

Hedge Betting to Guarantee Profits

Depending on the types of wagers you place, there may well be
occasions when you can use hedge betting to guarantee profits.
An example could be if you placed a wager on a team to win the
Super Bowl at the start of the season and then that team made it
to the Super Bowl final. You could hedge that wager by placing
another one on the other team to win the Super Bowl. If you got
the math right then you could create a situation where you make
an overall profit regardless of which team wins.

Another example would be if you placed a six team parlay or
accumulator, and the first five teams you backed all won. You
would then stand to make a sizable profit if the sixth team won
too, but stand to make nothing if it didn’t. At this point you
could place another wager on the opposing team to win, and again
you would be able to guarantee an overall profit.

Hedge Betting Examples

Now that we’ve explained the basics of hedge betting and why
you might want to use it, we’ll show you a few examples of some
hypothetical scenarios to illustrate exactly how you can use it.

In each of these examples we will be using the decimal odds format. If you’re not
familiar with this format, please take a look at our article where we explain the different
types of odds. We also provide a tool which converts odds into different formats that you
might find useful.

Hedging a Future/Outright Bet

Hedging a futures or outright bet is one of the most common
uses of the hedge betting strategy. The idea here is that, in
the right set of circumstances, you can create a situation where
you are guaranteed to make a profit regardless of whether your
original bet wins or loses.

For the sake of this example let’s say that you’ve placed a
$100 wager on the England soccer team to win the FIFA World Cup,
at odds of 12.00.

Now let’s say that the England team makes it to the final of
the World Cup, where they will be facing Brazil. Your preferred
bookmaker is offering the following odds on which team will lift
the trophy.

As it stands you will make a profit of $1,200 if England wins
the tournament and a loss of $100 if Brazil wins the tournament.
If you are still confident that England will win then you can
just let the bet ride, but you could use hedge betting to make
sure that you will make a profit either way. Let’s say you
decide to cover yourself, and placed a $500 bet on Brazil to
win.

You have now placed a total of $600 in wagers and are
guaranteed to win whatever happens. If Brazil wins you will get
a return of $750, for a total profit of $150. If England wins
you will get a return of $1,300, for a total profit of $700.
Basically you have sacrificed some of your potential profits to
make sure that you cannot lose.

Please note that you can choose how much you stand to profit
on each team winning simply by adjusting the size of the stake
on your second wager. If you staked $300 on Brazil, for example,
your profits would be $50 if Brazil won and $900 if England won.
If you staked $800 on Brazil then your profits would be $300 if
Brazil won and $400 if England won.

Hedging a Parlay/Accumulator

Hedging a parlay or accumulator is another common use of the
hedge betting strategy, and again the idea is to take advantage
of circumstances where it is possible to guarantee some profit.

In this example we’re going to assume that you’ve placed a
six team point spread parlay on the NFL, staking $50 at odds of
41.00.

Now let’s say that the first five teams all win. Your sixth
selection is the Green Bay Packers, and they are playing Chicago
later in the day. At this point you stand to make a profit of
$2,000 if the Packers cover the spread, but a $50 loss if they
don’t. Obviously you can choose to just let the parlay ride, but
you could easily lock in a tidy profit if you wanted.

Because you’re betting on the point spread, the chances are
that a bet on Chicago would be the standard 1.91. A good bet to
make here would be $500 on Chicago.

You have now wagered $550 in total, but you are guaranteed an
overall profit. If Chicago wins your return will be $955 for a
profit of over $400, and if the Packers win you’ll make a profit
of $1,500. As with the example we gave earlier, of hedging a
futures bet, you are essentially just sacrificing some potential
profit to make sure that you definitely come out ahead. Once
again you can choose to adjust the stake of your second wager to
determine how much profit you will make on each outcome.

Hedging Due to a Change in Opinion

Hedging due to a change in opinion is not as common as the
previously mentioned uses of the hedge betting strategy, but
there are times when it can be a sensible action. A large part
of successful sports betting is managing risk effectively, so if
you have a wager in place that you no longer think will win then
reducing your exposure might well be the right thing to do.

For this example we’re going to assume that you’re looking to
place a wager on an upcoming boxing match between Rico Ramos and
Claudio Marrero. The odds at your preferred bookmaker are as
follows.

You like Ramos, so you bet $50 on him to win at 2.50.

However, in the lead up to the fight you feel that Ramos
doesn’t look in his best shape and you change your mind about
his chances of winning. You therefore don’t want to be exposed
to a $50 loss. Seeing as you stand to make a profit $75 if he
does win, you decide to stake that much on Marrero winning.

You now have a total of $125 wagered, which you’ll get back
in full if Ramos wins. If Marrero wins you’ll get back $114.75,
for a loss of $10.25. You can’t make a profit from the fight,
but you’ve minimized your overall risk. The problem is that the
draw is also a possibility, and you’d be exposed to a $125 loss
if this happened. You therefore decide to place a small bet of
$6 on the draw too. This will return $126 in the event of a
draw.

Your total wagered is now $131, with the three possible
outcomes offering the following potential overall returns.

Ramos Wins

$125 returned for $6 loss

Marrero Wins

$114.75 returned for $16.25 loss

Ramos Wins

$126 returned for $5 loss

Obviously this is not an ideal situation to be in, as you
can’t win and are guaranteed to lose. Sometimes it is right to
take a small loss rather than let a bet ride though. In this
example your maximum loss is less than one third of the original
$50 you had at stake, so your overall exposure is reduced.

Hedging In-Play (Example 1)

Sports Betting Hedge Calculator

Most online sports betting sites offer in-play betting these
days. Also known as live betting, this is a feature which allows
you to place wagers on sporting events after they have started.
The hedge betting strategy can be a very useful one to use when
betting in-play, particularly if an event looks like it is going
to turn out different to how you expected.

For this example we’re going to use a tennis match between
Rafa Nadal and Fernando Verdasco. The initial odds at your
preferred bookmaker look like this.

You believe Nadal is going to win the match, so you back him
with a $100 stake.

You decide to watch the match, and after the first few games
it becomes clear to you that Nadal is not at his best. He’s
already had his serve broken, and doesn’t appear to be making
his shots as well as he usually does. At this point you feel
that there’s a very good chance that Verdasco is going to win.
You log back in to your bookmaker and see that the following
odds are now available.

Nadal is still the favorite, but the odds have shifted
somewhat due to Verdasco going for a break up. You decide to
place a $50 bet on Verdasco.

Betting Hedge Calculator

You’ve now wagered a total of $150, with two possible
outcomes.

Nadal Wins

$140 returned for $10 loss

Verdasco Wins

$115 returned for $35 loss

This is another situation that is not ideal due to a
guaranteed loss. However, your overall exposure is significantly
reduced from the original $100. If Nadal turns the match around
and wins then you’ll be $50 worse off than you would have been
if you had let the bet ride, but if Verdasco does go on to win
then you will have saved yourself $65.

Hedging In-Play (Example 2)

You can also use hedge betting in-play to lock in some
profits. Let’s use the same tennis match as above for this
example, and assume that you have again placed a $100 wager on
Nadal to win. After his initial slow start you decide not to
hedge your bet immediately, but instead wait to see how the
first set plays out. Nadal ends up breaking back, and winning
the set on a tie-break. The odds on the match are now as
follows.

The odds on Nadal have now dropped due to him taking the
first set, and the odds on Verdasco have lengthened. You’re
still not convinced that Nadal is at his best though, and you
think Verdasco might just stage a comeback. You decide to hedge
at this point, by placing a $25 wager on Verdasco.

Your total staked is now $125, with the following two
outcomes a possibility.

Nadal Wins

$140 returned for $15 profit

Verdasco Wins

$150 returned for $25 profit

As you can see, you are now guaranteed to make a profit
whatever happens. You’ve forfeited $25 of your potential profit
should Nadal win, but made sure that you will come out ahead
however the match finishes up. This could be a sensible thing to
do if you had genuine concerns about whether Nadal would see the
match out.

Advantages and Disadvantages of Hedge Betting

The advantages and disadvantages of hedge betting are really
quite straightforward. The main advantage of the strategy is
simply that it can give you a great deal of flexibility in
managing the level of risk you are exposed too. If you are close
to landing a big win from a parlay, for example, you can easily
use hedging to play it safe and ensure that you definitely make
some kind of profit. If you stand to make a loss on a wager, and
no longer want to be exposed to that loss, you can use hedging
to reduce the size of that loss.

This extra flexibility can be very useful
when it comes to
practicing good bankroll management. The main disadvantage of
managing your risk in this way is that it comes at a cost. As
we’ve highlighted in the above examples, reducing your risk
exposure can mean that you are guaranteed to take a loss.
Although you can reduce the size of the potential loss from an
existing wager, you also end up sacrificing the potential profit
from that 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.

Hedge Betting – Our View

There are a lot of conflicting views about how this strategy
should be used, and indeed whether it should be used at all.
Some people believe that you should always let existing bets
ride, and that hedging is a bad strategy that costs money in the
long run. Others believe that it is an excellent strategy that
should be considered at every opportunity.

Our view is somewhere in the middle. We very much believe
that it’s a strategy you should understand, as it can be
extremely useful in the right circumstances. It’s important not
to over use it though, as you can end up being overly cautious
and giving away far too much in potential profits to ever be
profitable overall.

Our Top Tip for Hedging Your Bets

How and when you use the hedge betting strategy is, of
course, entirely up to you. You may decide to use it only in
exceptional circumstances, or you may decide not to use it at
all. You may decide to use it frequently in order to keep your
exposure to risk as low as possible. There is no right and wrong
really, but we do have one tip that we recommend you follow.

The important thing with hedging is to judge each situation
on its own merits. We don’t believe that you should have any
hard and fast rules about when to hedge and when not to hedge.
Each time you are in a situation where hedging is worth
considering, you should weigh out the pros and cons and make
your decision accordingly. Basically you need to make sure that
you are hedging for the right reasons, and these reasons will
ultimately depend on your attitude to risk.

Hedge Betting Using Betting Exchanges

The rise of betting exchanges has opened up a number of additional
opportunities for using the hedge betting strategy, due to the fact
exchanges allow you to lay outcomes as well as back them. We haven’t
covered this aspect of hedging here as we are aware that not everyone
uses betting exchanges, and some of you may not even be familiar with
how they work.

Hedge Betting Explained Meaning

We do provide a detailed guide to using betting exchanges though.
This explains exactly how they work, and also features a great deal of
additional strategy advice specific to exchange betting.