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12. What is "hedging"? Is it a good betting strategy?

People pay insurance premiums in case their house burns down, or if they die young with a family, so why not do something similar with your wagers? That's the fundamental idea behind hedging. You are betting online, and stand to make a tidy profit if it hits. Perhaps 5 legs of a 6-team parlay have come in, or at the start of the season, you took a flier on a certain team to win the World Series. Now, the last game of the parlay is about to start, or your team just won the American League Championship Series, and you are on the verge of cashing a big ticket--if your team can win one (or four) more.

The dilemma with hedging is that, while it offers insurance of a sort, it costs you potential return. Sure, with regular insurance you pay a premium, but it is fairly small in relation to the risk covered. It might cost $400 to insure a $200,000 house, or a middle-aged man's life, for a year. Over the years, the costs mount up, but are still small in comparison with losing your home, or a source of income.

With online sports betting, on the other hand, you are paying a very high "premium" relative to the risk. Let's say you are betting $75 to win $4,500 that a particular team would win the Super Bowl. They make it to the Super Bowl, but they are big underdogs--not only are they expected to lose, but lose by a large margin. So you might decide to hedge your bet, laying a bet on the favorite on the money line. The bigger an underdog your team is, the more you will have to bet to hedge the other bet. If the other team is a -600 money line favorite, you will have to lay $450, or 10% of your potential winnings, just to get your initial $75 bet back.

I think ultimately the answer to whether hedging is right for you depends on your tolerance for risk. If your tolerance is low, hedging might be for you. Otherwise, you might not want to do it. My personal feeling is when sports betting, each bet should be considered on its own merits. If you are not fully confident when sports gambling, don't do it in the first place. In the hypothetical case posed above, you have a 60-1 bet ($75 to win $4500). On game day, someone betting the money line on the same team might be happy to get 4-1. So you already have sport bet odds that just about anyone else would envy. Spending extra money to "insure" that betting is a lot like spending insurance money in blackjack--sometimes it pays off, but in the long run it's a sucker play, given the cost of the insurance.

I agree with Patton. Don't make the wager unless you are confident in its outcome. Then again, let's say you have played a $30 six team parlay that pays $1,200 and you hit the first five games and are alive to the sixth--for argument's sake, let's say it's Oakland -2 v. Minnesota--and on the day of the game, Rich Gannon has food poisoning. Well, then I would hedge with either Minnesota +2 or Minnesota on the money line. I'd maybe play $300 to win $360 on Minnesota on the money line, and just pray Oakland doesn't win by 1. I'd have a $900 profit if Oakland wins, and a $330 profit if Minnesota wins.

This would be a sound hedge for me if I thought Oakland was still more likely to beat Minnesota. But let's say the Rich Gannon drama unfolded and he was projectile vomiting on the sideline and the Oakland second stringer, also a rookie, sees Gannon and he begins vomiting and then you see Ty Detmer start warming up, well, then you might want to increase your Minnesota hedge so that you are guaranteeing an equal payout.

I guess I've shown you how and why I hedge: when I've got a large parlay cooking. Otherwise, I'll hold on to it because it's the large parlays that hit that keep you in the game when you go through a losing streak, but that's a different topic altogether.

The Philosopher:
Hedging is unwise.

Typically what you are doing with a hedge is replacing a possible but not definite big win with a guaranteed smaller win. Well, everyone likes a sure thing, but that doesn't mean that in the long run, you are better off taking it.

Let's look at an example of a classic hedge: Before the season, you are super bowl betting $100 on Cincinnati to win the Super Bowl at 10-1. Now they are facing Detroit in the Super Bowl and are a narrow favorite. You can get Detroit at +120 on the money line, so the hedge would be to bet, say, $500 to win $600 on Detroit. If Cincinnati wins, you win $1,000 and lose $500, for a profit of $500. If Detroit wins, you lose $100 and win $600, for a profit of $500. So you win either way.

Is this a good hedge bet? I think you have to look at them as independent wagers and not be suckered into grabbing the free $500. If Cincinnati is more likely to win than the +120 price you're getting on Detroit would indicate, then your $100 to win $1,000 wager on Cincinnati is worth more than $500. Don't, in effect, let the book buy it back from you for $500 if it's worth more.

If betting Detroit +120 is a good bet, go for it. But what you happen to already have riding on the game is irrelevant. Judge this new bet on its own merits.

Probably the most common time people hedge is when they are close to hitting a big parlay. They've hit, say, their first five games in a six game parlay, like Turk describes, and they realize that just betting the other side in the sixth game, they are a guaranteed winner, albeit for a lesser amount than the payoff for a successful six team parlay.

In the long run, it's just a dumb strategy. All you're doing is losing your nerve and paying some vig in exchange for being allowed to back out of your six team parlay and change it to a five teamer. It feels good at the time, because you get your guaranteed win, but you're throwing away your chance at a bigger win. If you'd rather not take that particular risk for that particular reward, then the time to decide that was before ever gambling. You should have just bet a five teamer to begin with if you didn't want all of it to roll over to the sixth game.

But again, the sports gambling should be judged on individual merits. Turk describes an extreme case where your sixth team suddenly looks like a very weak play. But really that is not even about hedging, per se. In his scenario, sports betting on Minnesota is appealing regardless of what pre-existing wagers you have on the game. If the bet happens to be a hedge, then that is just a coincidence; it isn't what makes it the correct play.

I agree with most of what has been said here. Hedging, or "laying off," a bet is typically unwise because you pay more juice on the second bet. Why pay a penalty, in juice, to buy out of a game unless something has changed (winning other games--the front ends of the parlay--shouldn't change anything)? If the conditions have changed, say the betting angle you used to pick the game has disappeared, or a significant injury has happened, or even you find a fault in your original handicapping, it may be justified to hedge. (I have seen people refer to this as "juicing out of a bet.")

You can think of the "halftime middles" that bettors often go for as a form of hedging. That is, if you are ahead on your game betting at the end of the first half, you can make a second half bet on the other side, insuring that you'll win at least one, and possibly both.

The admitted mistake, or fallacy, that I personally make is that I do tend to scrutinize plays, and look for halftime middles, more when the game involves back end parlay bets compared to the frequency I do those things for straight bets. It shouldn't matter, but having the same "late" game on the back end of multiple live parlays does tempt one to lock in some "insurance," though it costs you over time. It is hard to resist at times.

I've often told about my first "missed hedge." On one of my first trips to Vegas, over 15 years ago, I played my first parlay of over 3 games ever. It was a college basketball 10 teamer for 600-1 at the Imperial Palace. I had tucked the ticket in my wallet and forgotten about it. At dinner, I pulled out my tickets to check my results and noticed that I had won the first nine games and had been watching the tenth before going to dinner. I had DePaul +1 and they were up by 6 with under a minute to go when we left for the restaurant. Of course, when I checked after eating they had lost by 2 in OT! My friends mentioned it to one of the cabbies we had and he told me I should have layed it off. I was so green I had to ask him what he meant. He described hedging and that in my case it would have been prudent. At the time I had to agree, as that was a lot of money for me back then and there had been an hour gap between the ninth win and the tenth game start! (I did get a 25-1 consolation prize for getting nine out of ten, at least.)

The Philosopher:
It's no mystery why the guy was driving a cab. Hedging is for squares. If a player wants to get paid for winning nine games without having to worry about the outcome of a tenth game, he shouldn't be sports betting ten game parlays (as the wiser Buckeye now realizes).

Then I should apply for my hack's license, because, under your narrow definition, Philosopher, I'm Mr. Square. Of course, you ignore the one key point in sports gambling: having a bankroll. You have to win in order to be able to wager. There is absolutely nothing wrong with hedging on a ten team parlay that pays 600-1 and, to suggest otherwise is ludicrous!

The bottom line is getting paid, and you don't get diddly when that tenth team doesn't cover. In the above example, let's say he had $100 on that wager. That's $60,000 in his pocket if DePaul covers. But he can put $30,000 on DePaul to lose (if he can rustle up the cash from friend and foe alike) and guarantee himself a $29,000 payday.

I have argued with others about this, but your "it's strictly an independent wager" doesn't wash on the final game of a large parlay because the simple fact is that it's very difficult to hit a large parlay, and by hedging on the last game, you are taking your profits, your reward for being right on all the previous games. Forget for a moment the financial incentive in doing so, for there is also a psychological payoff as well. Collecting a large sum for a small wager not only gives you confidence, but it provides you with the knowledge that you can beat the game, on occasion, with prudent, wise sports handicapping and financial management, and it is that wisdom that is priceless for a sports bettor.

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