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Key facts
- Hedge betting is a way to reduce risk or even guarantee a profit on a bet.
- When you hedge a bet, you take a second bet, often on the opposite result, taking advantage of a change in odds.
- The hedge cuts into the big windfall of a longshot paying off, but the benefit is that it gives a gambler a sure profit.
In TV shows or movies, you’ll often see a professional gambler get a hot tip on a horse race, prize fight, or big game and use that inside information to put all his money on the longshot bet.
In reality, professional gamblers usually take a much more conservative approach to betting. After all, this is their livelihood. They have bills to pay. So they need to generate a steady stream of income from their betting instead of risking a big loss, even in search of a big payout.
One tool they use to help with this is hedge betting.
What Is Hedge Betting and How Does It Work?
You hedge a bet by placing a second bet on the same sporting event. Usually, the hedge is for the opposite outcome of the event, but it doesn’t necessarily have to be.
The idea is to take advantage of the change in odds since you placed the original bet. It creates a situation where you reduce the risk associated with your original bet, and, at times, it can even guarantee a profit. Essentially, you’re eating into your potential payout from the first bet by risking money in the opposite direction to buy yourself an insurance policy.
An Example of Hedge Betting
Let’s say you place a futures bet on a big underdog prior to the start of the NCAA basketball tournament. Let’s say Butler, and you get moneyline odds of +4000. So you put down $100 on Butler to win March Madness.
Three weeks later, you’re one game away from your bet paying off. Butler has advanced through the first five rounds and is in the national championship game, against Duke. If Butler wins, you will make a profit of $4000. If they lose, you’re out $100.
Duke is the favorite in the game, and, as game day approaches, you’re growing more and more convinced that Duke is going to win, and, even with the chance of winning $4000 still alive, you’re getting antsy.
It’s Showtime
So you check the odds on the game. Duke has -120 moneyline odds. This sets up a chance to cash in with a hedge bet and guarantee yourself a profit, which will make watching the game much less stressful.
If you bet $2400 on Duke, then no matter how the game turns out, you’re going to make at least $1600.
If Butler pulls the upset, you cash in your original futures bet and get $4000, but you’re out the $2400 you put on Duke as a hedge. So you come out $1600 ahead.
If Duke wins, you’re out the $100 you put on Butler three weeks ago, but your Duke hedge earns you a $2000 payout for a net profit of $1900.
Sure, you don’t walk away with four grand in this scenario, but you also don’t walk away with nothing. And, like we said, if you’re doing this to make a living, the guaranteed income is often worth it.
Other Ways to Hedge
You may want to hedge if you’re on the verge of winning a parlay. For instance, if you put down a four-leg parlay, and you’ve won the first three legs, you may want to bet against the team you picked for the final leg. This will create a situation like the Duke-Butler example above, where you carve away some of the big profit you’d make if the parlay hits to give yourself a smaller, but guaranteed, profit, regardless of how that final leg turns out.
Occasionally, you can hedge on a game if news breaks that changes the odds drastically, such as an injury or a suspension. Or, if the team you picked is the one that suffered the injury or suspension, you may want to avoid a big loss by hedging. Even if you can’t guarantee a profit, you can reduce the amount of pain your bankroll will suffer.
With live betting on in-progress events, you can also hedge within a game. For instance, if you bet on one team to win prior to the start, and the odds have changed significantly at halftime, you can sometimes create a guaranteed profit situation by hedging.
The Perfect Storm
You can also hedge bets by point-spread betting and may even create a situation where you could win both of your bets. For instance, in the NCAA Tournament example, if you picked Duke as your future bet and hedged by picking the underdog, Butler in the championship game, you might want to bet the point spread instead of the moneyline. Then, in addition to all the benefits of hedging we’ve discussed, if Duke wins but doesn’t cover, your futures bet on Duke AND your Butler spread bet will both be winners.
