What is Hedging a Bet?
When you hear the term “hedging,” it is referring to a situation where a person or organization is attempting to limit something, usually some kind of downside to a situation or outcome. For example, if you know your father-in-law has political beliefs that don’t align with yours, you may hedge by not revealing your own views.
In betting, hedging means you’re limiting your potential financial loss. Many bettors hedge their bets as a part of their overall wagering strategy to help them either reduce how much they could end up losing on a bet or to guarantee some level of profit.
To do so, bettors place wagers on both sides of a bet. You see it quite often in futures betting, though it isn’t uncommon in day-to-day wagers, either. Below, we discuss the concept of hedging a bet as a risk-management strategy and give some examples of when hedging might be useful.
What does hedging a bet mean?
In sports betting, hedging is a risk-management strategy bettors use to help ensure either a minimal loss of money or at least some level of profit. The way they do this is by placing a second bet against their original wager.
Some bettors will do this even if they are confident in a winning bet. It helps keep their bankroll secure and keep their losses from piling up. While a win from a hedged bet isn’t going to pay out as well as the original bet on its own would have, it functions as insurance for the occasion when that original wager loses.
Despite the differences in wagering on the various sports, hedging your bets works the same. Futures, moneylines, point spreads, totals, and more — hedging a bet can be a possible strategy.
How do you hedge a bet?
You make a wager and then you make a second wager that will work against the original. The idea is that this is going to guarantee you see some kind of return — or at least less of a financial hit — than if you just made the original bet and ended up losing.
Let’s take a look at an example of hedging a futures bet.
At the beginning of the NFL season, you place a $100 bet on the New England Patriots to win the Super Bowl. Their Super Bowl odds stand at +1500, meaning you could receive a $1,600 payout ($1,500 profit) if that ends up happening. You end up being a bit of a fortune-teller, and the Pats do indeed make it to the big game.
You already have your wager in place on the Patriots winning, so to hedge your bet and guarantee a profit, you decide you’ll put a $150 wager on the Green Bay Packers, who are favored with -110 odds. The potential payout with a Green Bay win would be $286.36.
In the best case, the Patriots upset the Packers, and you walk away with a $1,600 payout. Your two bets of $100 and $150 mean you have a profit of $1,350. But if the Packers do end up winning, your payout would be $286.36, with your bets totaling $250. While you only profit $36.36, it is better than no money at all.
Not only did you secure your bankroll by guaranteeing a profit, but you protected your original wagers to make sure you wouldn’t take a loss.
In another fictional scenario, let’s say you’ve made a wager on a multi-game parlay, and things seem to be going very well over the first few games. If the last one wins, you’re going to get a nice payout. If not, you get nothing.
Unless, of course, you decide to hedge your bet by placing a moneyline wager against the team you have winning in your parlay. The result is a potential profit, or at least a reduced amount of money that you could lose.
Not every wager is going to have an opportunity to hedge. Much of the strategy is risk management, meaning you are simply reducing potential losses. Make sure you’re aware of the math and potential payouts before attempting to hedge a bet.
Using live betting to hedge your bets
The growth of online betting apps has also expanded the opportunities for legal markets across the US, including the Massachusetts sports betting market (once regulated). One of the largest benefits has been the introduction of live betting on sports. This style of wagering allows you to bet on a game while it is taking place. It may also allow you a chance to hedge your pregame bets.
If you’ve already made a pregame wager on something happening, you can wager against it through live betting to offset your losses or to help you maintain a profit. From halftime wagers and more, you’ll likely have multiple choices to help you offset your original wagers.
Benefits and drawbacks of hedge betting
There are pros and cons to every kind of betting strategy. For hedge betting, the largest benefit is the risk management that sometimes allows you to guarantee a profit, but at the very least helps you mitigate your losses.
There’s no doubt that no sports bettor wants to take a loss, but it’s also safe to say that everyone would agree it is better to lose less than everything you originally wagered.
Another pro is definitely the ability to help you manage your bankroll. You can reduce how much exposure you have with many bets, reducing potential losses and even occasionally guaranteeing a profit.
There are downsides, however. It is often difficult to guarantee a profit of any kind, and hedging bets can also prove difficult in some situations. Not every bet is going to lend itself to hedging, so it is important to know what your risks and rewards are before trying the strategy.
The cost of bet hedging is also a deterrent, considering you have to have the funds available to make the counter wager, to begin with. Every time you employ the strategy, you have to have additional money to make the wager. If you’re managing your bankroll strictly, which you should be, then you might not always have that option.
You have to determine what kind of risks you’re willing to take when placing wagers, if the cost of hedging them is worth it and how it will all impact your bankroll.