Hedging

“I bet $100 on the Cleveland Browns at 200-to-1 to win the Super Bowl, and now it’s Week 15 and they’re 7-and-6 and they might actually make the playoffs. Should I hedge?”

If you read sports and sports betting media at all, you’ll see that the only thing people love more than a good longshot is talking about hedging their longshot the moment it shows any sign of possibly winning.

Well here’s my take.

First, hedging is the same as selling part or all of your bet. If you bet the Browns and then hedge it in Week 15, you’re selling your bet. Is selling your bet good? Is it bad?

Is selling your used car good?

Is selling your roll of gold bullion coins good?

I mean, maybe? In the end it comes down to price, doesn’t it? If you have a perfectly good car that you use, and it Kelley Blue Books for $4,000, and someone offers you $3,200, should you sell?

Probably no. If someone offers you $5,000, then maybe you might sell it. It would depend on if you need the car or not, the replacement price of a car, the value to you of getting a different car, and so on.

But selling for $3,200 would be a bit of a desperation move.

Same with the gold. If market value is ten thousand, would you sell for nine?

If you’re asking if you should hedge a bet, you’re asking if you should sell it. The reasonable answer to that is you should sell it if you can get market value or more for it, and you probably shouldn’t sell it for anything significantly below market value.

The market value of a bet can be defined in a few ways, but probably the most useful would be however much you’d have to pay at current market prices to get the same bet, but with the vig factored out.

Fast forward a few weeks and let’s say the Browns have won the AFC Championship game. After a few days, the line on the Super Bowl against the Detroit Lions has settled at pick, implying each team is 50-50 to win the game.

What’s the market value of the bet? If the ticket cashes, it will be worth $20,100, so the market value is half of that, or $10,050.

If you can find a way to sell the bet for about that amount then do it. No reason not to, unless for some reason you like the Browns in the game.

For a Super Bowl, it may not be hard to sell your ticket. There are plenty of people who want to bet $10,000 on a big game like that, and some of them will even want to bet that much on the Browns.

But let’s say you can’t find a third party to sell your bet to, and you are contemplating making a bet on the Lions at a sportsbook to lock in your profit. Let’s say the best price you can find on the Lions is pick -107.

If you were to bet $10,390 on the Lions at -107, the ticket would cash for $20,100 if the Lions won. Profit locked in. Your net would be $20,100 minus $10,390 or $9,710.
That’s what you just sold your ticket for. For $9,710. You took a ticket with a market value of $10,050, and you sold it for $340 less. Did you get a good deal?

It’s hard to argue with a straight face that you did. How great would you feel if you sold your car or your gold for 3 percent below market value? If you needed the money and you were desperate and that’s all you could get for it, then sure. You do what you got to do.

And, you know, if the same were true for your Browns bet, then fine.

But that’s not how many people approach hedging sports bets. Many people make the bets, fully planning to hedge them (again, that means to sell them) at below market value.

In most cases that’s not smart.

Would you buy an ounce of gold for $2,000 with the plan that if gold goes up to $3,000 you’ll sell for $2,800? Does that make sense?

The bottom line is it’s hard enough to win at sports betting. It’s essentially impossible to win if you habitually sell your bets for below market value.

What To Do Instead

“But,” you say, “I don’t want a $10,000 bet on the Browns. I made a $100 bet. Now I want out. If you say hedging it is bad, what exactly am I supposed to do about it?”

Well, there’s not much you can do once you have the bet and much more money is at risk than you’d like, and you can’t find a buyer at market price. Maybe you have to bite the bullet and sell at a discount.

But with a little foresight, you don’t have to get yourself in that situation to begin with.

Nearly every bet people think about hedging is a parlay. Either they bought it as a parlay, or it’s a futures bet which is implicitly a parlay. (You’re betting that the team makes the playoffs, and then you’re betting they win their first game or series, and then you’re betting they win the next game or series, and so on.)

You’re betting on a series of events. Well, put fewer events in the parlay. Instead of betting an eight-team parlay, bet a seven- or six-teamer. (Usually a good middle ground is to bet your eight games as a round robin of three team parlays, since at most sportsbooks, three teamers have the least vig built in.)

Instead of betting on the Browns to win the Super Bowl, bet on them to win the AFC. Or bet on them to win their division or to make the playoffs. Then if the first bet cashes and you still want action on them to win the Super Bowl, go bet that for whatever amount you’re comfortable with.

Or, another option if you don’t like that one, is to bet less to start with. No one said you had to bet $100 on the Browns. You could have bet $10 instead. Then you’d have a two thousand dollar sweat rather than a twenty thousand dollar sweat.

Or, you can combine the two strategies by making a series of bets for smaller amounts. Some on the Browns to go over their win total. Some to make the playoffs. Some to win the division. Some to win the AFC. And a small capper to win the Super Bowl. That way you get payoffs all along the way and it doesn’t all come down to one huge sweat at the end.

But whatever you do, try very hard not to pay the vig twice—once when you make the bet, and a second time when you sell the bet back to a book. You’re just not going to win that way. ♠

Ed’s newest book, The Course: Serious Hold ‘Em Strategy For Smart Players is available now at his website edmillerpoker.com. You can also find original articles and instructional videos by Ed at the training site redchippoker.com.