Hedging: How Can it Help? - Prediction Machine

Hedging: How Can it Help?

Sports Betting

Hedging a Bet

Of all the betting philosophies or concepts I’ve learned over the years, hedging might be the one that I most regret not having a better grasp on when I began sports betting. It’s cringey to think about the money I threw away, or didn’t capitalize on, because I didn’t understand this important concept.

In fact, this concept is so crucial that “never hedging” was listed as one of our “10 Sports Betting Mistakes To Avoid”┬áback in June.

In this column, the aim is to help recreational and more seasoned bettors avoid traps and increase profit. We’ll start with a basic understanding of hedging before diving into more complex layers like hedging philosophies, scenarios when hedging might be appropriate, layering parlays for hedging, middling, and hedging contest entries.

What is a hedge bet?

A hedge bet is a wager often designed to guarantee profit from a prior wager and improve the worst case scenario, while simultaneously decreasing the maximum payout. In other words, it’s a bet against your prior interests to create a palatable outcome regardless of the result of the game.

The word “guarantee” is important because social media is filled with novice bettors referring to wagers as hedges, when they’re not true hedges and could actually be detrimental.

An example of hedging

Using the NFL’s 2023 Thanksgiving/Black Friday slate as an example, let’s say you have a 4-game parlay on three underdogs and a favorite.

The Packers (+285), Commanders (+455), Seahawks (+270), and Dolphins (-520) all hitting would turn your $100 wager into $9,426. If the three dogs hit, you’re heading into Friday with two possible outcomes: Either you lose $100 (if Miami falls to the Jets) or you win $9,326 profit (if Miami wins). But imagine you made a separate $500 bet on the Jets moneyline ($500 pays $2450), what is your best-case and worst-case scenario now? If the Dolphins win you’ll still get you $9,326, but you’ll lose an additional $500 on the Jets hedge, so your max profit is reduced ($8,826). If the Jets win, you’ll profit $1950 on your hedge, and lose $100 from the original wager ($1850 profit).

In this example you went from having a -$100 worst-case scenario to a $1850 worst case scenario, guaranteed yourself profit, and reduced your max earnings by $500.

Hedging usually takes place with the potential for a larger payout on a contest win, futures bet or parlay, but a more simple example of hedging is if you wagered $100 on 1 game: Commanders ML (+455) to beat the Cowboys. Later in the week, you learn that the Commanders have several injuries, so you decide to bet $80 on the Cowboys ML. I don’t recommend making a habit of doing this, because now you’ve paid the casino for juice on two separate bets, but this is a simple example of hedging.

Structuring parlays for potential hedges

I feel strongly that parlays are the junk food of sports betting and should be limited. However, if you are going to bet parlays, you can structure them in hedge-friendly ways so that you have the option to hedge or not later.

For instance, imagine for a moment the schedule in this scenario was reversed so the Dolphins-Jets game was the day before and then all three Thanksgiving Day games were taking place simultaneously. This simple scheduling change makes it impossible to hedge because with three games going on at once, there’s no way to isolate a single event to hedge. This example shows why structuring your parlays in a more hedge-friendly way can be advantageous.

Parlays that are layered in a way where each game happens at a different time, can be helpful for hedging and also protect you along the way if one of the legs gets bad news (injuries, etc.). For instance, betting the Lions on Thanksgiving, the Dolphins on Black Friday, the Chargers on Sunday Night Football, and the Vikings on Monday Night Football. It’s also helpful to have the final game of a parlay be a favorite (as in the Thanksgiving example above), so that your hedge bet has better odds.

With all this said, it’s important not to sacrifice conviction for betting structure. In other words, don’t add inferior bets to your slip just to create the structure outlined above.

Hedging Philosophies

In a room full of a dozen professional gamblers you could have a dozen different opinions on hedging. Some professionals, as a principal, rarely hedge. They might say, “I picked the game for a reason, I trust it’s going to win.” Others hedge more heavily and might say, “You’d be silly not to guarantee some profit.” Among those who do hedge, they may differ on how much to hedge a particular bet.

Ultimately the hedge ammount comes down to risk tolerance and conviction, and your situation in life. If a hedge presents you with life-changing money, however you define that, I’d recommend pulling the trigger.

Middleing

Back to the Thanksgiving example above, imagine that instead of betting $500 on the Jets moneyline, you instead risk $500 on the Jets+10.5 points spread (-110). This is still a true hedge as there’s no scenario where you can lose money, but we’ve also created a “middle” scenario (the Dolphins win by 1-10) where your original bet hits AND the hedge hits.

In this example, notice the profit from a Dolphins blowout (11 or more points) is the same as with the moneyline hedge, but the profit from a Jets win (after subtracting the original $100 wager) is much less ($354).

Hedging contests

Imagine you’re in a survivor pool and, if the Chiefs beat the Chargers Week 18, then you take home the grand prize. However, you’re battling three other people who are on three different teams and you’re not sure if they’ll win their games or not. It sounds like a messy situation to hedge because your payout is a moving target.

This video is essentially a short master class from Wall Street veteran Joe Peta on contest hedging and recommended for anyone in a similar situation. In short, the video outlines a strategy where you can safely not only hedge your survivor selection, but also the other teams selected by calculating the implied value of your ticket if your opponents were to lose.

False hedges

In our Thanksgiving example above, what if instead of a separate bet on the Jets, you used the Jets as the first leg of another parlay? This is very risky and not recommended because the whole point of a hedge is to guarantee profit, and you’ve now created a scenario where you can lose (If the Jets win the first leg, but you lose a subsequent leg).

Another example is if you have an underdog on the moneyline and live bet “hedge” the favorite -3.5 after they’ve scored a touchdown. This does decrease your chances of an overall loss, but it also creates a nightmare (the opposite of a middle) where your original bet and your second bet lose (if the favorite wins by 1-3). It’s highly recommended to avoid these false hedges and to bet hedges that guarantee you a profit.