Can you Tell How do Hedging Bets Work?
If you do not understand hedging bets at all, we will break them down for you in this section. Many people are familiar with this sports betting strategy, or at least they think they are. However, they are often unaware of how to use it properly or effectively to achieve the desired results. This is why we decided to provide some clarity on the topic. We think it will be useful for all bettors, especially for the ones who are starting out now. We will talk about how this strategy works best, when it can be used and why.
We will give you some examples to make it easy for you to understand the concept, and we will also list down some pros and cons of hedge bets. In other words, we will tell you everything you need to know about this strategy. Take a look.
The Mechanism of Hedging
Hedging wagers are relatively easy to understand, yet some bettors get them confused with arbitrage betting. The truth is that these two strategies have something in common, but they are used for different reasons and in different ways, so they are not the same, and you should make sure they are both clear to you before you even use them.
We have already explained how arbitrage works in the previous sections of our guide, and shortly we will explain the basics of hedge betting too. If you stay with us, you will soon be able to tell the difference between these two yourself.
So, let’s get started. Hedging is a strategy used to protect your wagers against losses by betting on other results which are different from what you originally wagered on. For instance, if you have already placed a bet on the team that is expected to lose an upcoming game, i.e. the underdog, you could now place a wager on the favourite.
You should note that this strategy should not be used all the time. Placing bets on both teams or players to win is not a sensible thing to do, as it will certainly lead to a loss. However, these are some cases in which you can use hedging to reduce the risk you are running in certain circumstances.
Now, let us tell you the biggest difference between arbitrage betting and hedging. When it comes to arbitrage betting, a punter simultaneously places a couple of bets (or more) on different results of a game when the right kind of opportunity arises. This strategy only works if there is a notable difference between the odds provided by two or more bookmakers.
On the other hand, hedging wagers are subsequent to the wager you initially placed. They are placed on different outcomes too. This strategy comes in handy when there is a change in circumstances that you did not expect, and it can be used to protect you from failure. It is some kind of insurance against losses, and at times it can also generate profits.
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Reasons to Use Hedging Bets
There are two main reasons to use this strategy: one is to guarantee profits, and the other is to reduce risks. Here is an example with the UEFA European Championship to illustrate how you can use it to make profits. Let’s say before the tournament begins you bet on a certain team to win, and later they make it to the final. In that case, you could hedge your original bet by placing a wager on the other team to win. Then, regardless of the outcome, you will generate a profit. It can only happen if you do your math right.
Here is another example. Let’s say you placed a six-team accumulator or parlay. Even if the first five teams you wagered on all won, the sixth team you backed would have to win if you want to make a good profit. In that case, you could place hedging wagers on the opposing team to guarantee a good profit.
As far as reducing risks is concerned, you can place hedge wagers to guarantee yourself a small loss rather than make that loss colossal. You want to use this strategy because you may not be confident in your bet winning anymore. Sometimes you can place a bet without knowing why. If later on, you regret your decision, you can try hedging to minimise losses.
For instance, let’s say you wagered £100 on player A to win against player B in an upcoming soccer match. However, a while before the game begins, you start having second thoughts. It could be that your instinct is telling you that your choice is wrong or that the best player on the team just suffered an injury. You would not want to risk that £100 stake. In that case, you could use the fundamentals of hedge betting to minimise the loss. What you could do is to place a £100 bet on player B to win. In the end, whichever bet loses, you will part with a small amount of money that will be a fraction of your original bet.
Continue reading this section of our guide. Below we will also cover hedge betting using betting exchanges.
In the previous section, we explained what hedge wagers are, and now we would like to back that up with some more examples. We will talk about different types of bets to give you a better illustration of the strategy. Take a look.
Outright or Future Bets Using Hedging
This type of bets is appropriate for the strategy we are talking about. If you create the right circumstances, you can generate profits no matter if your initial bet loses or wins.
Now, let’s assume you placed a £100 bet on England to win any Euro Championship at odds of 12.00. You can get a 1,300-pound potential return. Let’s assume that the team does make it to the final of the tournament where they will have to play the team of France. The bookmaker you typically bet at offers odds of 1.50 for France and 2.60 for England.
If your team wins, you will get back around £1,200. If it loses, you will part with the £100 you wagered initially. To ensure that you win regardless of the outcome, you can take advantage of the hedging strategy by wagering £500 on France to win the Championship.
So, you staked a total of £600 for both bets, and you now know that no matter what happens, you will generate a profit out of the hedge wagers. Here is why. Assuming that England wins, your real profit will be around £700 because you will get a total return of £1,300 (£1,300 – £600 wagered = £700). Now, if France wins, your actual profit will be £150 because the total return will amount to £750 (£750 – £600 wagered = £150).
How much you win depends on how much you wager on your second bet.
In-Play Betting Using Hedging
A live betting feature allows you to place bets on sports events after they begin. Using the strategy of hedging, you can make a profit or reduce a loss if the game does not reach your expectations.
Let’s say you want to bet in-play on a men’s tennis match. The bookmaker you usually use to place bets at displays odds of 1.40 for player A and 2.80 for player B. You place a £100 bet on player A because you think that he has better chances of winning (the sportsbook’s odds prove that too). However, during the game player A does very poorly and it soon becomes evident that he is not in the best shape of his life. No matter how good he usually is, right now the shots he is making show that there are chances of him losing the match. So, you log into your bookmaker’s account, and you see that there is a slight change in odds: 1.60 for player A and 2.30 for player B.
You can place bets of £50 on player B to win in order to minimise your loss. Hence, you have staked a total of £150 on the match covering the only two possible outcomes. Here is what happens next. If player A wins, you will get a return of £140, which means that you will have lost £10. If player B wins, you will get a return of £115, meaning you will have lost £35.
It may seem a terrible decision to back both players and end up losing. However, it is much better to lose £35 than £100 which you originally staked.
Here is another example of how hedge bets play out using the tennis match from above.
Again, we assume that you bet £100 on player A. You wait for the first set to end to make your hedge because you want to see how the game plays out. Player A manages to win the set on a tie-break. You log back into your bookmaker’s account, and you see that the odds have changed: 1.15 for player A and 6.00 for player B. Since player A won the first set and has better chances of winning the game, his odds are lower. Respectively, the odds on the second player are higher. Although player A has shown incredible skills during the first set, you still don’t think that he is in the best shape. So, you go for the hedging strategy by wagering £25 on player B just in case.
In the end, you have wagered a total of £125. Here are the two possible scenarios. If player A wins, you will get back a total of £140, which means that your actual profit will be £15. If player B wins, you will get back a total of £150, meaning your actual profit will be £25.
Hedging Wagers When you Change Your Mind
It is not typical for a bettor to change their opinion at the last minute, but it can happen. And though hedging bets are not normally used in such circumstances, there are situations which call for this strategy. If you no longer think a team or player is going to win a game, placing another bet is a wise thing to do. After all, making right decisions in sports betting is mostly about being able to effectively assess the situation and manage the risk.
In the following example, we will assume you want to bet on a boxing match that will be played shortly. The odds for player A to win are 2.50. Player B gets odds of 1.30. And finally, your preferred bookmaker displays odds of 21.00 for the game to end with a draw.
Your favourite for this game is player A, so you place a £50 bet on him. However, a little while before the fight begins, you find out that he is not in great shape and you begin to doubt his chances of winning. Since you do not want to lose your money, you decide to use the hedging strategy, and so you stake a wager of £75 on player B.
The total money you wagered amounts to £125. If player A gets to win, you will get that money in full. However, if player B wins, you will only get a return of £114.75, which means that you will lose £10.25. This is a minimal loss. It is not going to leave you broke, which is a good thing. However, it is still a loss. However, let’s not forget that the game could also end with a draw. In that case, you would lose £125. This is why you decide to make a wager on the draw too, so you stake £6. So now, if the fight ends with the score even, you will win back £126.
Considering that you decide to back all of the possible outcomes the same way as in our example, you will have staked a total of £131. Here are the potential returns. If player A wins, you will get a return of £125, meaning that you will lose £6. If player B wins the fight, you will end up with a return of £114.75, which means you will lose £16.25. And finally, if the game is tied, you will get a return of £126 and will be losing £5.
As you can see, losing is sometimes inevitable, but the most important thing is to reduce that loss so that it is easier to handle.
Accumulator/Parlay Bets Using Hedging
The last scenario we are going to use has to do with parlays and accumulators. In the following example, we will imagine you place a point spread parlay with six selections on a game. The odds are 41.00, and your stake is £50.
We assume that the first five teams on your bet win. If the next selection wins too, you are expected to get a return of £2,000. However, if the spread is not covered, you will lose £50. Now, you could easily leave things as they are and accept a loss of £50. However, you can also use bets to cover that loss. You could place a £500 bet on the opposing team on odds of 1.91.
So, the total amount of money you wagered is £550. If the team you backed originally wins, you will get back a total of £3,500, meaning that your actual profit will be £1,500. On the other hand, if the opposing team is successful, you will get back £955, which means that your actual profit will be £400.
Pros and Cons
This strategy comes with certain advantages and disadvantages. The biggest advantage is that it gives you flexibility when it comes to handling your exposure to risk. You can significantly minimise your losses if the original bet you placed is not successful. The best part is you can also generate profit out of hedge bets.
When it comes to the disadvantages, one big downside is that you sacrifice part of your prospective profit in order to minimise the potential loss. As you can see, everything comes at a cost. If you are okay with the minuses, then you will have no problem using the strategy. Of course, you should use it wisely.
Hedge Betting Using Exchanges
Betting exchanges are on the rise, and it is possible for you to use hedging for this marketplace. However, since not a lot of people are interested in these opportunities, and some of you might not be aware of their existence, we decided not to tell you about hedge betting using exchanges in this post. However, we do offer a section about betting exchanges in our guide.
There are different views about hedging. Not all bettors are thrilled by it. It is important to keep in mind that whether you want to use this strategy or not is up to you. Whether you will use it constantly to reduce your risk of losing or only in exceptional circumstances, the choice is all yours. It is quite important that you make a decision after weighing down the pros and cons of each loss or profit. You need to judge every situation separately. Just remember: whatever you choose to do, it has to be for the right reasons.
This is everything you need to know about this strategy. We tried to give you as many examples as possible and hope they helped you get the fundamentals of hedge betting. If you’re ready to pick up your bookie then visit our UK betting sites list.
If you are eager to know more about the types of betting, look at these pages:
Types of Betting
- Arbitrage Betting Explained
- Kelly Criterion Betting Strategy
- Moneyline Betting in Sports
- Parlay Betting Explained
- All about Point Spread Betting
- Meaning of Over Under Betting
- Understanding Outright Bets
- What Prop Bets are About
- Explaining a Bet Accumulator
- Making Betting Permutations
- What is Exchange Betting