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 though, 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.
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 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 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.
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.
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)
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.
You've now wagered a total of $150, with two possible outcomes.
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.
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 & 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.
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.
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.
Author: Brad Johnson
Updated: July 2015
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