Hedge betting involves placing numerous bets on different outcomes on the same sporting event with the end result being that a profit is returned or that the risk of the bet is reduced regardless of the actual outcome. Anybody that has ever used the phrase ‘hedging your bets’ at least has some sense of what it means to be involved in hedged betting. In essence it means to play it safe to mitigate your risk where possible.
Let’s imagine that you’re going for a walk but you aren’t sure whether it’s going to rain or not. If you were to hedge your bets then you would take a waterproof coat with you regardless. If it rains, you’re covered. If it stays dry then you’re safe. That is an example of hedging your bets in real life, but many people also look to hedge their bets when it comes to their gambling exploits, which is what will explore here.
Putting it simply, hedging your bets in a gambling sense involves betting on the same event but on different outcomes. You might, for example, place a bet on Liverpool to beat Everton in the Merseyside derby, as well as another bet on the draw no bet market for Everton to win. This way if Liverpool win then you win your original bet, if the match ends in a draw you get your stake back, or if Everton win then you win more money.
Another way to consider hedging is as though it is giving yourself some insurance so that you get at least some money back when you’ve placed a bet. It is essentially a risk management strategy, but one that is not clever to engage in on a regular basis. It is mainly worth considering hedging your bets on three specific occasions with the first being when you have the ability to lock in a guaranteed profit on an existing bet.
You can also think about hedging when you’ve changed your mind about a bet or when you realise you’ve made a mistake. With the latter scenario the best thing you can do is Cash Out your bet, but sometimes that’s not possible. As a result, you can look into hedging your bet and that will at least mitigate any potential losses. The same is true of when you’ve changed your mind about about a bet.
The key thing about hedging is that you do it on an existing bet, as opposed to placing two bets at the same time. By placing another bet on a market that you’ve already bet on, you can sometimes guarantee yourself a profit irrespective of the outcome of the event that you’re betting on. This is because of a change in the odds of the thing that you’re betting on either over time or because circumstances have changed.
Links To The World Of Finance
Whilst hedge betting is, as the name suggests, specific to the world of gambling, it is also practised in the financial world. If you’ve ever heard the term hedge fund then you’ll know this to be the case. In finance a hedge is an investment that someone will make in order to reduce the risk of adverse price movements in one asset or another. Hedging tends to involve taking an opposite position to an existing security.
Hedging inherently involves a risk-reward strategy. On the one hand, it reduces potential risks, yet on the other it chips away at the potential gains you stand to make. Imagine living in an area that is prone to earthquakes. You might decide to take out earthquake insurance, paying a monthly premium to do so. If the earthquake comes you’re quids in, yet if it doesn’t you’ve simply been making payments for no reason.
In the financial world a perfect hedge is one that eliminates any risk on a position. In truth, even the perfect hedge is not without cost. It can be a confusing strategy for those not involved in the world of finance, but it is one that has its trade-offs. Whilst hedging is intended to reduce risk, it is still a practice that has downsides. It is not a perfect practice, but one that is worth engaging in at certain times.
Hedging Your Sports Bets
Most of us only place bets because we think they going to win. If we’re successful then money will come our way, but if we’re not then we will lose out. That is, of course, unless we have decided to hedge our bets. Consider a scenario in which you have bet on Liverpool to win the Champions League before the tournament gets underway. You received odds of 10/1, and the Reds make the final of the competition.
You could if you wanted to simply let the bet ride and wait to see what happens in the match. Alternatively, you could look at the odds to see if it’s possible to guarantee yourself a profit if the other team in the final were to win. Because you placed a bet of £10 on Liverpool, you stand to win £100 if they’re successful. You could also place a bet on the opposition that would see you win £20 in exchange for a £10 bet.
If you didn’t hedge your bet then you would lose £10 if Liverpool lost the match. If you hedge, however, then you cost yourself £10 but stand to win the same amount if Liverpool lose. In other words, you reduce your possible profit on Liverpool winning by £10, meaning that you’d only win £90, but if they lose you still stand to make a £10 profit. The question is, is it worth the risk or not?
When Is The Right Time To Hedge Your Bet
There is no hard and fast rule when it comes to hedging. The answer to whether to hedge or not depends entirely on your situation and how willing you are to take a risk. It can also depend on how much money you bet in the first place. If it’s only a small amount of money, and you’re not too worried about losing it, then it’s probably worth just letting the bet ride. If it’s a large amount of money, on the other hand, then hedging might be sensible.
If you’re in a situation whereby you can guarantee yourself a profit by placing a certain bet then it’s probably sensible to do so. After all, how many times have you thought you were guaranteed a win only to see the outcome that you bet on not come true? To go back to our example of Liverpool in the Champions League, how convinced will you have been that you were going to win your bet if you’d placed it on AC Milan in 2005?
If you could have guaranteed yourself a profit before the Miracle of Istanbul, you would have felt a lot better at full-time than you would have done if you didn’t take that guarantee. Of course, no two bettors are the same, so you’ll have to decide for yourself whether hedging is for you. Some people love the idea of a guaranteed profit, whilst others hate the notion of eating into their potential profits.
It’s important to note that it’s much easier to hedge your bets when the outcome is binary. In football, that would involve betting on a match, such as a cup final, in which there cannot be a draw. It’s why people will often hedge something like a tennis match, because there are only two possible outcomes. Of course, you’ll need to make sure that if you’re betting on a cup final then you bet on the team to lift the trophy rather than to win.
Why Doesn’t Everyone Do It?
Given that hedging is designed to ensure that you get a profit on your bets, the obvious question to ask is why doesn’t everyone do it? The answer isn’t a simple one. For starters, you don’t tend to win very much with hedged bets. It might be a way to guarantee a profit, yet the profit won’t be particularly large. You could have two bets of £10 at odds of 10/1, win one and lose the other and still walk away with over £100.
Alternatively, you could hedge the bets and see one of them lose, the other win and walk away with less than £100 because of how much the hedge cost. It’s not that one strategy is better than the other, but it’s important to know what you’re doing before you engage with. It is also true that you need to do it a lot in order to really see its benefit, which some people simply can’t be bothered to do.
There is also a truth that hedging is quite boring. It is time-consuming to figure out how you can guarantee a profit on your bets, which isn’t necessarily worthwhile if you don’t make that much money. Perhaps worse than that is the fact that many bookmakers will look to limit your account if they think you’re hedging your bets. It is a much more common activity on exchanges, because they stand to make money whatever happens.
On top of all of that, you also need to be aware that hedging is easier with some bets than others. It’s much trickier to hedge In-Play bets, for example, just as it is harder to hedge against accumulators. Indeed, In-Play betting is a good way of hedging your bets but not necessarily a form of betting that you can hedge against. These are all the sorts of things that you need to think about when you’re considering whether to hedge or not.
The other side of hedging that we’ve already mentioned is about managing your risk. Yes, guaranteeing a profit is great, but isn’t always possible. As a result sometimes you might want to hedge in order to mitigate any potential losses. You might, for example, have placed a large bet on one particular outcome that suddenly looks less likely to happen. By placing a hedge, you might not be able to guarantee a profit, but you can at least avoid losing too much money.
The reality is that hedging in order to guarantee a profit is not all that common a scenario. For obvious reasons, bookmakers try to avoid situations in which they’re not the ones who will walk away with money no matter what happens. Hedging in order to manage risk, however, is something that you can do on a regular basis. The question is whether you’d actually want to or not, given how it will eat into your profit if your original bet is a success.