The hedging question

CharlieMaxwell · Apr 12, 2004

I'm tired of the same arguments of posters saying hedging and taking profits are smart. While hedging for a guaranteed profit might make you emotionally happier, you can’t possibly defend this practice in any mathematical way. And in the long run, math wins.

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Charlie

Fishhead · Apr 12, 2004

As I have stated many times in the past, each case DOES have different merits on whether one should considering hedging a particular bet or not with such considerations as emotional factors, possible middles, value, etc.etc.etc.

However, in the most gerneral and high percentage of cases, what WILD BILL is saying is exactly right!!

It amazed me last week on how so many people were so quick to justify themselves being right in saying that by NOT hedging and giving up a sure profit was a WRONG decision.

In closing, I would suggest that everybody on both sides of the fence of this issue keep an OPEN MIND at the time he or she is possibly considering a hedge or that of someone else.

Good article Wild Bill, as I believe you have at least given the stout players that think that hedging is the ONLY way to go something to reconsider down the road.

TheGeneral+ · Apr 12, 2004

Thanks Charlie. Good read Bill & your views have been discussed in detail before here. I was somewhat convinced in the past that your thoughts are correct here, although I am more than willing to hedge a wager if I find the opportunity.

I do not play teasers and parlays or futures often, but if I do and the chance comes along to make some guaranteed money then I will do it. Now, understand that I may only see this chance 2 times per year.

I think it is just an individual choice & I cannot see how anyone is going wrong while making a profit.

Whether one goes into a 6 teamer looking to hedge that last game or just decides to do it after re-calculating the scenario in that last game, I cannot blame them for taking the guarantee.

As for emotional happiness, when you are an emotional wreck, a little emotional happiness is good medicine

Thanks for the read. Nicely put.

Fishhead · Apr 12, 2004

General- I dont want to get into this now, and I am sure it is something you agree on anyway.

But anybody that is betting a 6 team parlay or teaser with the thought in mind that they will hedge the last game...... is pure suicidal.

D2bets · Apr 12, 2004

From your article: "However, bettors seem to make a very important strategic error. Whenever you make a wager, whether it’s a parlay, a future bet, or just a straight bet, you should always be aiming to win about one unit (putting aside the merits of varying your bet size for now).

Think of it this way, if you stand to win 10-times the normal size of your wager from winning on your future bet, that mathematically works out to being close to the same thing as if you bet 10-times your normal wager on a straight bet. Would you consider that to be a good idea?"

I COMPLETELY DISAGREE. When I do a futures wager I almost always -- do it with high odds (i.e. 30-1, 50-1, etc) and do it when it presents serious value in relation to the actual event occurring. In such situations I most certainly do not limit myself to winning 1 unit. In fact, if it's really good I will simply bet as much as I am allowed -- the limit! I do this knowing that I can, or mostl likely can, then hedge off a lot, or all, of the risk, and then still have a lot left over for a big score still.

Good numbers on futures can often present more value than any typical straight bet ever can because it can in and of itself set up almost immediate and guaranteed hedges. I suppose you could still let it all ride, but I see nothing wrong with at least removing all risk and taking a little profit and letting the rest ride. In addition, there are often creative hedges, including middles, that can be used along the way to sweeten the pot. With good line shopping/anticipation it does not have to "cost" much or anything at all.

The math differs in each situation but blanket statements that you should only try to win 1 unit per future and that you should never hedge are just foolish IMO. Each situation has its own merits and hedging is often a good strategy...and I am very driven by math.

WildBill · Apr 12, 2004

D2, I did say if you follow a bet-sizing system you could work that in, but there is no math to justify a 10 unit bet unless you are in an "inside info" kind of situation. In other words maybe 2 or 3 plays a year could be justified. In BJ where you are often playing at a disadvantage a large bet size scheme is needed, but in sports where you control the games you bet on I don't think you can justify any bet being 10 times more valuable than another without bringing in unnecessary risk into your bankroll scheme. Either that or just don't bet the 1 unit plays because they are rendered insignificant if you are betting anything more than 3 or 4 times that on any given play.

jdodger · Apr 12, 2004

The exception that proves the rule?

I had Connecticut going all the way in the $20 entry fee office pool. Although there were 5 other entries that also had the Huskies, I had done well enough in the earlier rounds that I was guaranteed to win $360 first prize money if they went all the way, and quaranteed $150 for second prize if they won the first game and lost the second in the final four.

So the "pros" in the office told me I should hedge by taking Duke in the first game, guaranteeing at least a profit on the deal.

I declined, saying I would let my 20 buck investment stand on its own.

Of course, Duke lost but covered plus 2, meaning that the "one point middle" came through and I'm now getting all these "I told you so's" from the hedging proponents.

WildBill · Apr 12, 2004

That wasn't part of a thought out and structured betting plan. If you aren't betting within a plan or you don't have any desire to take betting all that seriously then hedging is fine. It just isn't backed by math or even common logic. It is purely an emotional move on virtually all occasions and it is a move that you pay for in long-term expectation. Just like insurance. Most of us probably lose money over our lifetimes with auto insurance or health insurance, but the peace of mind it brings is generally money well spent. If you need that peace of mind then go ahead and hedge.

D2bets · Apr 12, 2004

Bill, you said you should be aiming TO WIN about one unit. When it comes to a 30-1 or 50-1 play that would involve wagering a tiny fraction of a normal unit. If you have a futures play that is an overlay it is crazy to limit yourself like that.

Examples help illustrate...

Before the tourney, I got 23-1 oddsa that no #1 seeds would make the Final Four. I estimated that the "true odds" of that happening IMO was around 6-1. As a result, I would have bet all I possibly could have on that even if I wasn't willing to risk that much. I'd simple bet all I can and then hedge off whatever I was uncomfortable holding with creative hedging one way or another. As it is, that play barely lost but I still cashed 8 to my 1 risked while still having a shot to cash 18 to my 1 if Duke had lost.

Basically if you have a good future you should bet MORE than you normally would and then hedge off that excess that is above what you normally would risk on single play.

WildBill · Apr 12, 2004

Betting "all you could" is a dangerous thing wouldn't you agree? Even at 23-1 with a 6-1 edge, you still aren't justified in going crazy on the betting side. Every math expert will tell you that. Imagine if all the number ones made it to the Elite 8, then how much hedging could you really afford to do and still make money? I am sorry if I don't agree with you, but your methods seem extremely risky for most people. If you are someone that has low limits and a huge bankroll I could see you saying such a thing, but for the average person staying within limits even when a bet looks like a steal still makes sense. There are edges to be had almost every day, there is no justification for potentially crippling yourself just because you get a bigger than average edge on something today.

tkf18ny · Apr 12, 2004

i can see hedging a futures bet if the odds change enough but hedging a parlay makes no sense

if you win the first 5 games of a 6 team parlay let it ride

Why hedge?Just bet a 5 teamer if youre gonna end up hedging
This is a dumb as insuring a blackjack

D2bets · Apr 12, 2004

Iguess it's all relative. "All I cou;d" could never cripple my bankroll, but I see what you're saying. Nonetheless, with some creativity what I exampled could have been partially hedged off even from the very start with positive expectation.

Bottom line is all comes down to betting value, both on the original and on the hedge. But when you find, especially major value, you need to hammer it...though that means different things to different folks.

D2bets · Apr 12, 2004

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by tommy fu:
i can see hedging a futures bet if the odds change enough but hedging a parlay makes no sense

if you win the first 5 games of a 6 team parlay let it ride

Why hedge?Just bet a 5 teamer if youre gonna end up hedging
This is a dumb as insuring a blackjack<HR></BLOCKQUOTE>

This I agree with...unless the odds change. Only way I'd do this is if I added a team at the end of the parlay just for generous odds being offered knowing that I could probably scalp and/or middle it on a backend hedge. I've done this before.

HacheMan · Apr 12, 2004

quote:
--------------------------------------------------------------------------------
Originally posted by tommy fu:
i can see hedging a futures bet if the odds change enough but hedging a parlay makes no sense

if you win the first 5 games of a 6 team parlay let it ride

Why hedge?Just bet a 5 teamer if youre gonna end up hedging
This is a dumb as insuring a blackjack
--------------------------------------------------------------------------------
Response By D2bets
<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>This I agree with...unless the odds change. Only way I'd do this is if I added a team at the end of the parlay just for generous odds being offered knowing that I could probably scalp and/or middle it on a backend hedge. I've done this before. <HR></BLOCKQUOTE>

Guys, Im sorry, but I just don't agree at all. If I have $100 on a 6 team parlay that pays 45-1, and I have swept the first 5 games with only one to go, I bet the other side on the 6th team/game and guarantee myself approximately $2250.00. Now if it's for a smaller amount, maybe $10 for $$450, I let it ride, but you don't just "throw away" over 2 Dimes on a bet like I used as an example.......

D2bets · Apr 12, 2004

Hache, what we're saying is that, under your example, if you would have just bet the first 5 teams only then you probabky would have cashed like $2350, not $2250, so why would you add the 6th team in the parlay if you were planning on hedging against it anyway? Now I suppose if you changed your midn midstream on that particular game or if the odds moved or someone got injure, etc then maybe it can be excused, but planning to hedge the 6th game in a parlay like that doesn't really make sense.

HacheMan · Apr 12, 2004

Your right D2, I do understand what your saying. Your basically saying if your going to hedge a 5, 6, or more team parlay every time, just parlay fewer. But, when we make a 6 team parlay for example, no matter how strong we feel about it, usually we know the odds are very against us and it hitting. Many times I think experienced bettors just throw some out there just for fun, and if for some reason one does come close to hitting, it's usually a surprise. Do you know that when I was much younger, and a rookie at this stuff, twice in a matter of months I hit 9 out of 10 in a 10 team~parlay?! The sad part is, as I said, I was a rookie at payoffs, etc., and had no idea I could of backed that last game up to guarantee a huge profit. And now, that I know everything I need to know, I can't even get close to hitting a 6 teamer, much less a 10 teamer!

WildBill · Apr 12, 2004

Ok we are getting silly. Come on, do you guys being as smart as you are bet 6 teamers??? If so I have nothing to say other than good luck

areeff · Apr 13, 2004

Knowing when to hedge and when not to is clear to anyone with a clue, and is always absolutely mathematically correct. But saying To hedge or not to hedge in any situation flat is just dogmatic.

There's a reason these are writing articles about hedging profits instead of making money doing them. They leave it to the pros.

[This message was edited by areeff on April 13, 2004 at 03:20 AM.]

WildBill · Apr 13, 2004

Funny. I don't do this for a living, I do it because I enjoy it and like discussing it. Say what you want, but I have yet to see people give mathematical proof that taking a profit is good math. Their "proof" is all about psychological gain and not financial gain. I hear more bogus statistical reasoning for this than almost any other subject out there. In some rare cases hedging does come out to be correct, but much of the time it comes only after something else happens along the way that required additional risk to the equation to make it happen. I hear this one a lot too, some guy will say I knew I could bet the Pats and hedge in the Superbowl, completely ignoring the fact that the Eagles were supposed to be there by mathematical inference, but were not. The Panthers being in the game changed the numbers, but the hedger wants you to believe it was his foresight that gave him value in the bet, not the upset that occur independently and that the hedger could have made more money on just by betting the upset he would by default like to take credit for. But if you really want to believe in it by all means go ahead; I wish you the best.

Fezzik · Apr 13, 2004

Bill, IMO this was your best article yet.

I agreed with most of it, two refinements:

1. No reason not to hedge if you can find a rogue line that is basically "free" to play the other side

2. No reason not to overbet some great stuff for more than 1 unit, 'knowing' you can hedge some of the extra stuff back to make up for overbetting to begin with. MSU 40-1 and Okie State 40-1 were good examples of teams you could bomb in this year, and look to hedge if they made the final four or Champ. game. The bets were so good they belonged in "back up the truck category".