Sports Betting Lessons: Should You Hedge Your Bet?
Sports Betting Lessons
By Professor MJ
Should You Hedge Your 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?”
1. A Concrete Example
In order to make sure you understand clearly what I’m talking about, here is a concrete example.
On May 23rd, 2017 when the Pittsburgh Penguins were up 3-2 in their NHL semifinals series against Ottawa I made a post about how I believed the Penguins to win the Stanley Cup at -105 (decimal format: 1.95) was providing value.
Let’s suppose that you followed my advice and placed a $105 bet to win $100 on Pittsburgh to win the Stanley Cup. Let’s call it the “first bet.”
The Penguins proceeded to eliminate the Senators and on June 1st, 2017 they were up 2-0 in the finals against Nashville. The series price with the sportsbook William Hill was Pittsburgh -600 versus Nashville +400 (decimal format: Pittsburgh 1.1667 versus Nashville 5.0).
Was it a good idea to hedge your bet by betting Nashville with odds 5.0 to guarantee yourself a profit? The short answer is: NO.
Suppose that, despite my recommendation against it, you still decided to hedge your bet. More specifically, your “second bet” was a wager of $41 on Nashville to win the Stanley Cup. Your potential return was $41 * 5.0 = $205, so your potential net profit on this second bet was $205 - $41 = $164.
Here is a summary of the two possible outcomes:
Under such circumstances, it is tempting to hedge your bet and lock a $59 profit. However, from a statistical standpoint you should avoid hedging your bets. Keep reading if you wish to understand why.
The only exception would be if you truly believed the +400 line on the Predators was inflated and therefore provided value. Otherwise, why would you waste money on a bad bet?
How do you know if a line provides value (i.e. is a +EV bet)? I covered that specific topic in another article called "Value Betting."
2. The Main Reason People Hedge Their Bets
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 have ended up losing the series and you could have told yourself “What an idiot, I could have secured a profit by betting Nashville at +400 earlier!!” But if you follow my advice and you avoid hedging throughout your gambling career, I’m sure your bankroll will be bigger.
3. The Coin Flip Story (Why You Should Avoid Hedging Your Bets)
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 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 no matter the outcome!! 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 you are getting 1.98 odds (= 210 / 106).
For the same reasons, unless you have a strong reason to believe Nashville +400 is a value play, avoid hedging. It’s as simple as that.
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 win some money, but you shouldn’t!
Notice it can be very difficult to resist the temptation of hedging the last leg of an accumulator. Let’s say you placed a $100 wager on a 5-team parlay, where the decimal odds on each team were 2.25, 1.80, 2.50, 1.60 and 2.15, respectively. The potential return is therefore $100 * 2.25 * 1.80 * 2.50 * 1.60 * 2.15 = $3,483 (potential net profit = +$3,383).
After the first four legs have all won, you are only missing the last one before winning the $3,483 jackpot. Assume the fifth game is a matchup between Team A and Team B, where Team A with 2.15 odds is the last leg of the parlay. You really need them to win.
To avoid raising your blood pressure too high, you buy peace of mind by hedging your parlay with a bet on Team B with 1.741 odds. Suppose you bet $2,000 to win $1,482 (= $2,000 * 1.741 - $2,000). Under this scenario, the two possible outcomes are:
It sounds very appealing to secure a $1,382 profit. However, according to the theory, you should avoid doing so. For the well-being of your bankroll in a long-term perspective, you are better off rolling the dice and hoping Team A wins without hedging. If they do, you just saved yourself $2,000.
Only exception: you are convinced the line on Team B provides value. However, that would be surprising since you originally bet against that team when you made the parlay bet!
Once again, the procedure that determines whether a particular line is a value play or not can be found in my Value Betting article.
I hope this article convinced you that hedging is not a smart option. Let me now address another question that I'm being asked on a regular basis.
5. Who is the Best Online Sportsbook?
To me, the answer is crystal clear:
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|You are an American:||Solid reputation, good odds and attractive bonuses!|
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