Sports Betting Lessons: Should You Hedge Your Bet?
Here is a question I get asked often by sports bettors who have a pending parlay or future bet:
“Should I hedge my bet?”
This article will answer this recurring question with a resounding “No!!!”
1. What is Hedging in Sports Betting?
Hedging a bet is an advanced strategy where you bet AGAINST your own original wager in order to reduce the risk-level or to guarantee a profit.
For example, suppose that several months ago you bet Team A to win the championship of its league. Back then, you put $100 at risk for a potential return of $2,100 (i.e. a potential net gain of $2,000 after deducting the amount of your wager).
Now, you are delighted to see Team A reach the finals. Just one more win before you cash big money!
Knowing that you will be devastated if Team A loses the game, you decide to bet their opponent.
Suppose that sportsbooks expect a very tight game. Therefore, the odds on the game are as follows:
Before the game starts, you decide to risk $1,100 for a potential return of $2,100 on Team B (i.e. a potential net gain of $1,000).
Here is the situation:
In summary, you are guaranteed to pocket a $900 gain, no matter who wins the finals!
Sounds like a good plan, right? Wrong!
As you will find out in this article, hedging is detrimental to your bankroll in the long run (from a mathematical standpoint).
2. Hedging a Parlay (Bad Idea!)
2.1 A Concrete Example
Suppose you made a 5-team parlay (also called an “accumulator”) and the first four teams have won.
You might be tempted to hedge the last bet to make sure you will make some money, but you should not!
Let’s say you placed a $100 wager, where the decimal odds on each of the five teams were 2.25, 1.80, 2.50, 1.60 and 2.15 in decimal format, respectively (in American format: +125, -125, +150, -167 and +115).
The potential return is therefore:
$100 * 2.25 * 1.80 * 2.50 * 1.60 * 2.15 = $3,483
In other words, your potential net profit is $3,383 (i.e. $3,483 - $100).
2.2 Hedging the Last Leg of a Parlay Bet
After the first four legs have all won, you are only missing the last one before winning the $3,483 jackpot! How exciting is that?
Assume the fifth game is a matchup between Teams A and B, where Team A is the last leg of the parlay. The odds are as follows (we already saw earlier that the line on Team A, in decimal format, was 2.15):
To avoid raising your blood pressure too high, you buy peace of mind by hedging your parlay with a bet on Team B.
Suppose you bet $2,000 to win $1,482 (= [$2,000 * 1.741] - $2,000) on Team B.
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.
2.3 Why Hedging a Parlay Bet is a Bad Idea
Securing a profit hardly seems like a bad move. But it is. Why?
Generally speaking, the expected profit of a bet is given by the following formula:
Expected Profit = (Potential Net Gain * Probability of Winning) – (Potential Loss * Probability of Losing)
Given the money lines on the matchup between Teams A and B, which were +115 and -135 in American format, the implied true probabilities of winning for each team were 44.74% and 55.26%, respectively.
I’ll save you the math, but trust me on this one (or check out this article where I teach you how to convert odds into probabilities: https://www.professormj.com/pages/sports-betting-101-how-to-understand-odds-point-spreads-and-probabilities).
Accordingly, your parlay’s expected profit before the 5th and final leg is:
Expected Profit = ($3,383 * 44.74%) – ($100 * 55.26%)
Expected Profit = +$1,458
Now, compare this figure to the profit you could secure by hedging: $1,382.
In other words, you are throwing out the window $76 of expected profit ($1,458 - $1,382).
Unless you have studied statistics, many people fail to fully grasp the concept of “expected profit.” I’ll do my best to explain it here.
It should be viewed as a long-term thing. If you were in this same exact situation (a 5-team parlay where the last leg has 2.15 odds) a large number of times, you can expect to earn $1,458, on average, per parlay.
Most sports bettors focus too much on the present. They will be thinking: “Who cares about the expected profit? What matters is what’s going to happen with my current parlay!”
With this line of reasoning, you will cut down on your long-term profit. Guaranteed.
2.4 Why Not Do a Smaller Parlay?
When some people hedge their last leg of a five-team parlay, I always want to ask them the following question:
If you were going to hedge the last leg of a 5-team parlay, then why didn’t you bet a 4-team parlay instead?
You just wasted money doing the hedging part! Here is proof of that.
In the example above, the odds on the first four teams were 2.25, 1.80, 2.50 and 1.60, right?
By risking $100 on this 4-team parlay, your total return would have been:
$100 * 2.25 * 1.80 * 2.50 * 1.60 = $1,620.
In other words, your net gain was $1,520 (i.e. $1,620 - $100).
Now, compare that $1,520 figure with the net gain you secured by hedging the last leg of your 5-team parlay: $1,383.
You just burned $137 right there ($1,520 - $1,383)!
Put differently, you should have simply done a 4-team parlay instead. By doing so, you would have saved yourself $137.
Some people even plan the hedging part in advance, which boggles my mind!
I have read posts online where sports bettors say:
“Here is the 8-team parlay I just made. If I win the first 6 legs, I’ll start hedging.”
If that’s your plan, then just do a 6-team parlay to avoid throwing money out the window!
2.5 Parlay Bets = Sucker Bets
Doing parlays is exciting, but they are sucker bets.
Many of you won’t like the sound of those words. But my goal is not to be nice to you, but rather to help you increase your winnings, or at least diminish your losses.
Just ask any sportsbook manager and he will tell you how much he loves customers making parlays. The house edge on such bets is astounding.
I wrote a critical article on this topic that shows how much parlays are bad for you. Just to give you an idea, a sports bettor doing 3-team parlays will lose money three times faster than a guy making single straight bets.
I strongly invite you to read this insightful article because it could save you hundreds, if not thousands of dollars, throughout your sports betting career.
3. Hedging a Future Bet (Bad Idea!)
Let’s revisit the example I shared with you in the introduction, where you risked $100 to win $2,000 on Team A to win the league’s title.
Remember that, once Team A reached the finals, we had the option of securing a $900 profit by hedging. We did so by putting some money on their opponent called Team B.
What was our expected profit prior to the championship game? Was this expected profit greater or smaller than the guaranteed $900?
Remember that my example assumed a 50-50 chance for both teams to win the finals (we reach the same conclusion no matter the probabilities used here). So:
Expected Profit = ($2,000 * 50%) – ($100 * 50%)
Expected Profit = $950
As you can see, hedging diminishes our expected profit by $50 (i.e. $950 - $900).
Again, the hedge bet was harmful to your bankroll.
4. The Coin Flip Analogy
Still not fully convinced that hedging is doing damage to your wallet?
Give me one more shot to do so via a very simple example: a coin flip.
The coin is equally likely to land on “heads” as “tails”, right? Both outcomes have a 50% chance of hitting.
That being said, do you agree that the fair odds when betting this game are +100 in American format, or 2.0 in decimal?
That means that betting on the outcome of a coin flip is a good value wager if you have odds that are better than the above thresholds.
Conversely, you should NEVER bet on a coin flip at odds that are weaker than +100 in American format, or 2.0 in decimal. Don’t you agree with that?
Now that I’ve set up the table, let’s move on to the convincing example.
Suppose you made the following bet with Bettor #1:
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 Bettor #2 comes up to you and makes the following proposition:
“Hey buddy, I could help you secure a $4 profit if you wish!
I’ll offer you to risk $106 on tails for a potential profit of $104.
So if tails comes up you will win $104 with me, but lose $100 with Bettor #1 for a net profit of $4. And if heads comes up, you’ll win $110 with Bettor #1, 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. This wager amounts to betting at -102 odds, or 1.98 in decimal format.
As we saw earlier:
You should NEVER bet on a coin flip at odds that are weaker than +100 in American format, or 2.0 in decimal.
Many people argue: “How can securing a profit possibly be a bad idea?”
The answer is: because you made a bad bet in the process!
Just because Bettor #2 gives you the opportunity to secure a profit, it doesn’t make a bet on “tails” at -102 odds a good wager.
5. Rare Cases Where Hedging is Okay
Those who hedge 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 leave money on the table, as seen in previous sections.
Still, there are a couple of situations where hedging is more acceptable:
5.1 The potential gain would be life changing to you
Suppose you are earning $35,000 per year with your full-time job.
Now, you placed a parlay or a future bet whose potential return is $80,000. That’s more than two years of hard work for you!
In these conditions, I would understand you for wanting to hedge and perhaps guarantee yourself a $30,000 or $40,000 gain.
5.2 The hedge bet is a good value wager
That’s rarely the case, but I’ll still mention it here.
Suppose we’re talking about an 8-team parlay where your first seven teams have won. The last leg requires Team A to beat Team B.
At first sight, there is no reason to bet Team B. When you did your parlay, you had the conviction that Team A would beat Team B, so why would you suddenly change your mind?
One possible exception would be if one sportsbook has a soft line on Team B. For instance, the vast majority of bookies have a money line on Team B at +120, but one specific sportsbook has +140 odds.
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” (you can read it by clicking here!).
Hedging a future bet, or the last game of a parlay, is often tempting.
However, I hope this article convinced you that it is bad practice because you are leaving some profit on the table every time you do it.
Sure, you may feel like a genius if you hedge a bet and it turns out that you would have lost your original wager.
But in the long run, hedging is detrimental to your bankroll.
Unfortunately, the majority of sports bettors focus on short-term results and it ends up cutting down on their long-term gains.
I hope you appreciated this article! The goal of the Professor MJ brand is to help you make as many sound decisions as you can in your sports betting activities.
I invite you to read my other sports betting lessons, or to look at the many winning betting systems based on past data that I have developed on Major League Baseball and the NHL.
I’m very grateful that you read this article, thanks for reading my friend!
Professor MJ (University Statistics Professor & Sports Betting Expert)