There’s no doubt that there are various betting strategies in the world of sports betting. While the majority of these strategies are focused on increasing your winnings, others are focused on reducing the amount you lose if things go against you, or even locking in value if a price has shortened.
This is where hedging a bet comes into play. It’s a well-known strategy with professional punters who target longer-term markets in anticipation of price shortening. Ultimately, the strategy can be used to minimise your losses and “lock in” profits even when the event hasn’t concluded.
In this article, you’ll learn the basics of hedge betting, its advantages and disadvantages, and the possible situations where you can use it.
The Basics Of Hedging A Bet
When a professional bettor places a bet, they do so with the intention of positive expected value (EV). In the long run, positive expected value betting strategies will always come out on top, however, the variance in the short term can result in significant bankroll fluctuations, especially with strategies that tend to take longer odds (E.g. those over a price of $10).
This is where hedging comes into play, for the management of variance. There are two ways to hedge. The first method involves backing other runners/teams in the race/game. The second method involves laying on Betfair the same outcome you already backed. Professionals will most often hedge when the price of their original bet has firmed significantly, allowing them to hedge off to “lock in a profit” regardless of the outcome.
For example, a professional bettor may have backed Jon Rahm to win the US Open golf at $14, and then after one round, Jon Rahm’s price is $5 to lay on Betfair. This would present an opportunity to effectively “sell” their bet to another participant at $5 after backing it at a far higher price of $14.
The Advantages Of Hedging A Bet
Now that we’ve gone over the basics of hedge betting, let’s take a closer look at the advantages that hedging betting has:
- Reduce variance
A hedge bet can be used to reduce variance and hence smooth out the equity curve for a bettor.
- Lock in profits
Assuming a backed price has firmed enough after being bet on, hedging can allow profits to be locked in regardless of the final outcome.
- You can account for changes in predictions.
Hedging allows professional bettors whose view has changed to rebalance their portfolio and even flatten out their position entirely.
The Disadvantages Of Hedging A Bet
- It can be costly
The biggest drawback of hedging is that there is a cost to it. With betting with bookies, the cost is usually in the 5-8% range, when laying on Betfair the cost is typically a 5% commission to Betfair (if that outcome doesn’t win) plus a cost of crossing the spread on Betafir.
- It can’t be used for all markets.
For less liquid sports and markets, the liquidity can be quite limited, especially once an event is in play.
- Funding cost
To hedge on Betfair, you need a bankroll big enough to cover the biggest potential liability. For example, if laying $100 @ a price of $10, the bettor needs $900 in their account.
When To Hedge Your Bets
After learning the pros and cons of hedge betting, you might be wondering when you should use it. Here are some examples of the best times to use hedge betting:
- When a big price has firmed significantly in-play
- Change In Opinions/Predictions
- Futures bets have firmed significantly
- Parlay(Multi) Bets are down to the last leg
Related: Parlay Bets In Horse Racing
Overall, hedging is an excellent strategy to use when you’re in those high-risk and high-reward situations. It also comes down to bettor preference, including their staking strategy and also the level of risk tolerance. Whilst there are potential benefits, it’s not for everyone and all cases. Thus, you must have a good understanding of when and how to use this strategy effectively.
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Article Tags: Sports Betting, Betting, Betting Strategy, Betting Odds, Sports
