Should I hedge my bet?

Here is a question I get asked quite often from people who have a pending parlay or future bet: “Should I hedge my bet?”

In order to make sure you understand clearly what I’m talking about, here is a concrete example. On May 23rd when the Pittsburgh Penguins were up 3-2 in their semifinals series against Ottawa I made a post about how I believed the Penguins to win the Stanley Cup at -105 (decimal: 1.95) was providing value. Since then they have proceeded to eliminate the Sens (it wasn’t easy!!) and are now up 2-0 in the finals against Nashville. The series price at William Hill is Pittsburgh -600 Nashville +400.

Should I hedge my bet by betting Nashville at +400 (decimal 5.0) to guarantee myself a profit? My short answer is: NO. The only exception would be if I truly believe the +400 line on the Predators is inflated and therefore provides value. Otherwise, why would you waste your money on a bad bet?

Those who hedge such bets do it for one common reason: they want to lock in a profit so they can sleep better. They want to avoid the situation where their bet eventually loses and they curse themselves for not hedging. I’m a statistician, so based on the numbers only my advice is to avoid hedging because in the long run you will maximize your bankroll that way. Otherwise you will leave money on the table.

Sure, the Penguins might end up losing the series and I could tell myself “what an idiot, I could have secured a profit by betting Nashville at +400 earlier!!” But if you follow my recommendation to avoid hedging many times (say, on 500 occasions) I’m sure your bankroll will be bigger than if you had done it every single time.

Think of it this way. Suppose that you have made the following bet: risking 100$ for a potential profit of 110$ that the next coin flip will land on “heads”. It’s pretty unlikely that you will be able to find a guy who is crazy enough to accept such a deal, but that’s not the point here. Let’s just assume we do have such a pending bet.

Suppose a second guy comes up and makes the following proposition to you: “If you’re interested, you could risk 106$ on “tails” for a potential profit of 104$ with me. So if “tails” comes up you will win 104$ with me but lose 100$ with the first guy for a net profit of 4$. And if “heads” comes up, you’ll win 110$ with the first guy but lose 106$ with me, still for a net profit of 4$. So basically, you are guaranteed to be 4$ richer!! Do we have a deal?”

You should decline his proposition. He is asking you to risk 106$ to win 104$ on a bet that clearly has a 50% chance of winning. You should never accept odds below 2.0 when you have a 50% win probability, and in this case we are getting 1.98 odds (210 / 106).

My Penguins example above concerned a future bet. The same concept applies to parlays (also called “accumulators”). Suppose you made a 5-team parlay and the first four teams have won. You might be tempted to hedge the last bet to make sure you will win some money, but you shouldn’t (unless you are convinced the line you are considering betting provides value, which would be surprising since you originally bet AGAINST that team when you made the parlay bet!).

The sports betting book that I am writing will answer many more questions like these. It will start by covering the basics about odds and probabilities, before explaining "arbitrage betting" and "value betting" which are two great ways to increase your bankroll. I'll also cover money management and present several winning strategies on different sports. If you would like to suggest topics (or specific questions that you would like answered, like the one from this article) to include in my future book, I will be very happy to hear (!

Feel free to comment, I hope I was able to bring some insight!

Professor MJ