What is Hedging a Bet?

The term “hedging” refers to the act of limiting a potential downside or negative outcome in a situation for a person or organization. For instance, if you are aware that your father-in-law holds political beliefs that differ from yours, you might choose not to disclose your own views as a way of hedging.

Hedging in betting refers to the act of minimizing potential financial losses. Bettors often incorporate hedging into their overall wagering strategy to either decrease potential losses or ensure a certain level of profit.

In order to do this, bettors place bets on both outcomes of a wager. This is a common practice in futures betting, but it is also seen in everyday wagers. In the following discussion, we explore the idea of hedging a bet as a strategy for managing risk and provide some instances where hedging can prove helpful.

What does hedging a bet mean?

Hedging is a strategy employed by sports bettors to manage risk and safeguard against potential losses or secure at least some profit. This is accomplished by placing a secondary bet opposing their initial wager.

Even when bettors are confident in their winning bet, they may choose to hedge it. This strategy helps protect their bankroll and prevent accumulating losses. Although a hedged bet may not yield the same payout as the original bet would have, it serves as insurance in case the original wager turns out to be a loss.

Although there are variations in wagering on different sports, the concept of hedging your bets remains consistent. Whether it’s futures, moneylines, point spreads, totals, or other forms of betting, hedging can be a viable strategy.

How do you hedge a bet?

You place a bet and subsequently make a counter-bet that opposes the initial one. The purpose behind this strategy is to ensure you receive some form of return, or at the very least minimize the financial impact, in comparison to solely making the original bet and facing a loss.

Now, we will examine an instance of hedging a futures bet.

At the start of the NFL season, you wager $100 on the New England Patriots triumphing in the Super Bowl. With their odds set at +1500, a successful outcome would yield a generous $1,600 payout, comprising a $1,500 profit. As fate would have it, your prediction proves correct, and the Patriots secure a spot in the championship match.

Since you’ve already placed a bet on the Patriots winning, you decide to hedge your bet and ensure a profit. To do so, you opt to place a $150 wager on the Green Bay Packers. The Packers are favored with -110 odds, and if they win, you stand to earn a potential payout of $286.36.

If the Patriots manage to pull off an upset against the Packers, you could potentially earn a generous $1,600 payout. By placing bets of $100 and $150, your profit would amount to $1,350. However, if the Packers emerge victorious, your payout would be $286.36, considering your bets totaling $250. Although the profit would only be $36.36, it is still preferable to receiving no money at all.

By ensuring a profit, you not only safeguarded your bankroll, but also shielded your initial bets from incurring any losses.

Imagine a different made-up situation where you’ve placed a bet on a multi-game parlay and the initial games have been going exceptionally well. If the final game turns out to be a triumph, you’ll receive a satisfying payout; otherwise, you’ll end up with nothing.

However, if you choose to mitigate your risk, you can place a moneyline bet against the team you predicted to win in your parlay. This could result in a potential profit, or at the very least, minimize the amount of money you could potentially lose.

Hedging may not be possible for every bet. Risk management is a crucial aspect of strategy, where the aim is to minimize potential losses. Before considering hedging a bet, ensure you understand the calculations and potential payouts involved.

Using live betting to hedge your bets

The proliferation of online betting apps has not only increased the potential for legal markets throughout the US, but has also impacted the Massachusetts sports betting market (pending regulation). Among the notable advantages is the advent of live sports betting, which enables individuals to place bets during the course of a game. This type of wagering also offers an opportunity to mitigate risks associated with pregame bets.

If you have already placed a bet before the game starts, you can make additional bets during the game to counterbalance any losses or enhance your earnings. With options like halftime wagers and more, you will have several opportunities to mitigate the impact of your initial bets.

Benefits and drawbacks of hedge betting

Every betting strategy has its advantages and disadvantages. In the case of hedge betting, the primary advantage lies in its risk management capability, which occasionally enables you to secure a profit and, at the very least, assists in reducing your losses.

It is undeniable that every sports bettor aims to avoid losses, however, it is universally acknowledged that minimizing losses is preferable to losing the entirety of the initial wager.

One additional advantage is undoubtedly the capability to assist in managing your bankroll. By placing multiple bets, you can decrease the level of risk involved, minimizing potential losses and occasionally securing a profit.

However, there are disadvantages to consider. Ensuring a profit is often challenging, and hedging bets can be problematic in certain scenarios. It’s crucial to understand that not all bets are suitable for hedging, hence it is essential to assess the risks and rewards prior to implementing this strategy.

In addition to the cost, the requirement of having sufficient funds for the counter wager is another factor that discourages bet hedging. Each time you employ this strategy, you need to have extra money available for the wager. If you are strictly managing your bankroll, as you should, this may not always be feasible.

When placing wagers, it is important to assess the risks you are comfortable with taking, evaluate whether the cost of hedging them is justified, and consider how these decisions will influence your bankroll.