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The idea of hedging your bets is simple. You will bet on one prediction and then make a bet against your original bet to make sure you win either way. However, if you simply pick a game and then bet on both results, you will not make any money. You need to strategise your hedge bets, and to bring the best results you must know how betting markets work.
Importance of Juice
The previously mentioned strategy, of picking two contrasting bets will not bring good returns because of the juice that a sportsbook uses. Juice, or vig, is the house edge that a sportsbook generates by assigning slightly shorter odds.
The perfect example is a coin flip. The chances of the coin landing on either side is 50-50, but bookmakers will not offer even money odds on either bet. Instead, they may offer odds of -110 (1.9). This gives the house an edge of around 5.2%, and you will need to win 52.63% of the time to not go in the red. If you are interested in how it works, you can catch up on our guide to juice in sports betting.
So how does this affect hedge betting? Well, the only way you can place two opposing bets and make money, is if there is a shift in the odds.
How to Calculate Odds
You will need to calculate the odds and how much is required to stake to successfully hedge your bets. Then, ask the question: should your stake cut your losses, make a profit, or make a larger profit than your original bet?
Underdog bets are great for hedge betting, especially when the bookmaker underestimates their chances. This will give you generous odds, and a good place to start. In a game between the New York Knicks and the Detroit Pistons, the bookmaker gives these odds:
- New York Knicks to win: 1.50 (-200)
- Detroit Pistons to win: 2.70 (+170)
You place a $10 bet on the Detroit Pistons to upset the favourites. Your bet of $10 will win $27, which is a profit of $17. That profit line, of $17, can be used to purchase hedge bets against the Pistons. Just subtract some of your potential winnings, and you have guaranteed a profit however the game turns out. Now, let’s say that the first quarter has finished and the Pistons have taken the lead, the new odds are the following:
- New York Knicks to win: 2.30 (+130)
- Detroit Pistons to win: 1.60 (-167)
In three separate examples, we will show you what you can do with the adjusted odds.
Cut Your Losses
You want to place just enough money on the Knicks to cut your losses, should they win. A bet of $4.50 will do, as it will bring $10.35. If the Knicks win, you take home $0.35 (after subtracting the initial bet of $10. Should the Pistons win, you take home $13.50 (after subtracting the $4.50 hedge bet).
You cannot decide which way the game can go, so you place a hedge bet that brings an equal profit to what your original would. A bet of $8 on the Knicks will bring you a total of $18.40 – $10 = $8.40, if the Knicks should win. On the other hand, if the Pistons win, you will receive $9 in profit ($17 – $8). This way, you are not really banking on either result, as they bring almost the same rewards.
Back the Hedge Bet
Maybe you think that the Pistons got lucky, and you should go all in with the favourite after all. You can spend the whole $17 you would win on the Pistons on a hedge bet backing the Knicks. What this does is bring you $39.10 in pure profit. If the Pistons win, you take nothing, but if the Knicks can make a comeback, you have a great reward.
Though the odds in the example may be somewhat exaggerated, and the result swings heavily in your favour, it is a solid example of hedge betting. You are looking for inflated odds that have a chance of changing dramatically.
Types of Hedge Bets
There are numerous ways to hedge your bets, it all depends on what betting markets you want to pick.
Bets on the winner of a competition or a league can change drastically throughout the season. It is all about choosing the right time when the odds work in your favour. You should bear in mind though, that most futures bets have many possible outcomes. For this reason, it is much more difficult to make your predictions. However, that can work in your favour, as the traders in the bookmakers are in the same boat as you.
The good thing about futures bets is that it lasts all throughout the season. This means you have a lot of time to carefully consider your hedge bet and no one is going to rush you. When good odds are offered, you can sit down and make all the due calculations as to what you want from your hedge bet. Do you want to make the biggest profit from your original bet, on your opposing bet, or make equal profits? But remember, that if there are numerous contestants or teams in a competition, you run a big risk. If there is a chance that another team or contestant may win, you might have to think about two or more hedge bets – which, logistically speaking, is a bit of a nightmare.
This is perhaps the most popular choice amongst hedge bettors. To make a pregame bet and then afterwards, if the odds shift in your favour, make a good hedge bet. This method of betting works well if you can pick out teams that are underestimated or have extremely long odds. What you want to do is buy longshot odds, and then if the team can put up a fight in the game, the odds on the favourite may swell up to the point you can make a hedge bet.
The danger with live betting is that the odds can change dramatically, and quite quickly too. You need to be on the ball all the time and ready to snap up great prices.
Hedge bets are also widely used in parlays. Say you have three selections: A, B and C, and you are a bit unsure about bet A. You can place a second bet on the opposite result of A, and then add it into a parlay with B and C. Now, you have two parlays, and whether game A goes one way or another, you stand to win a good chunk of money. You can mix up hedge betting into your parlays in many different ways, just make sure that they always bring a profit at the end of the day.
Early Bird Odds
If you bet frequently, you may have noticed that pregame betting odds can change in the days preceding an event. The odds right before the game starts are called the closing line. This presents an opportunity for hedge bettors, especially if there is a large discrepancy between the early bird prices and the closing line value.
Predicting which way the odds will shift if they do at all, is no easy feat. However, you can shop around and check to see what prices are being offered at different sportsbooks. If the odds on a bet are longer at your bookmaker than elsewhere, you can expect them to bring those prices down in the days preceding the event. As the price is brought down, the odds on the opposing bet should extend by a small amount, just to balance the scales. If you bet enough and your profit margin allows you to place a hedge bet, then you can bet the other way, and be guaranteed money – before any of the action has even taken place.
Learning how to value bets is quite difficult, but a good place to start is in our guide to closing line value.
Bookmakers do not like it when you make arbitrage bets, and they may limit your betting account or close it. This type of betting is not illegal, but it can be damaging to bookmakers because it is a surefire way to make money.
Arbitrage betting is when you make a profit on the discrepancies in odds between bookmakers. If the gap between the odds is big enough, then you can place a bet at one sportsbook, and a hedge bet at another. The size of the bets should be proportionate to the odds on either bet and that way you can make a small profit on the event. It does not even matter which bet wins, as it should bring you a tiny profit.
Apart from getting on the wrong side of the bookmaker, there are no dangers to arbitrage betting. It is not a big moneymaker strategy, as this bet only brings in minuscule rewards. However, if you bet with larger stakes, then in time you can grow a massive profit.
Our guide to arbitrage betting has a lot more information on the subject and a few examples of how to apply this form of hedge betting.
Betting exchanges offer bettors all the tools they need to place hedge bets. They are peer-to-peer betting markets, in which there is no sportsbook and no juice. Instead, you propose a bet by offering odds and setting a stake. Then, another bettor can take you up on your proposal, and place a “lay bet” which is basically an opposing bet. Lay betting is the bet that the sportsbook would do. The wager opposes the original bet and uses inverse odds.
If bet A is offered at odds 2.1 (+110) with a stake of $100, the potential rewards are $210. The lay bettor needs to stake $110 and if bet A loses, they win the $100 from the person who makes the original bet. The odds on the lay bet are 1.91 (-110).
The odds can change drastically at a betting exchange, and there is a lot of opportunity to place hedge bets. The only thing you need to keep in mind is that you need a “peer” to bet against you. If there is no opposing bet, then you have no bet. Should you propose a $100 bet and a peer places only $50, then you only have a $50 bet. If another peer places an extra $25 against your bet, then your bet increases to $75, but unless no one else throws in some money, you will not be able to place your original $100 bet. This is why you have to offer reasonable odds (which you can do anyway as there is no juice) and pick the right time.
Is Hedging Legal?
Technically speaking, there is nothing illegal about hedge betting. Whether you are arbing, predicting closing line values, or placing live hedge bets, you are completely within your rights at any sportsbook. However, some bookmakers take up a stricter stance against hedge betting. Whilst it is completely legal for you to hedge bet, it is also legal for the sportsbook to limit or even close your account. Arbitrage betting, or suspected arbitrage betting, is the most common reason why a sportsbook may suspend you.
This is quite a normal thing too, it is the same as a casino asking a guest to leave because they think the guest is counting cards. But there are ways to avoid these punishments, and you can find out how to bet safely in our piece on why sportsbooks limit or close accounts.
The greatest win is to never lose money. This is the ultimate principle of hedge betting, and though you are not hitting any massive parlays or trifecta bets, it brings massive profit in the long run. Just consider the fact that you can cut your losses to an absolute minimum, and then reap the profits whenever you bet. The extra $5 here or there will pile up, and at the end of the month, you can expect a lump of profits in your betting account.
Hedge betting does come with its risks though, so you always need to prepare for the fact that it will not go your way all the time. You cannot assume that you will always get the opportunity to make a hedge bet. This is why you should always only bet with money that you can afford to lose, and never go beyond your financial means. If you play smart and pick your bets carefully, then you can use some of the above-listed strategies to work in your favour.
Lloyd is passionate about online gambling, he lives and breathes blackjack and other table games, and he enjoys sports betting.