Hedge Betting explained – What is Hedging

Suppose you made an online bet on any recent sports events. The chances of you winning look pretty good. Unless you don’t. Usually, we don’t prefer to evaluate our losses as opposed to rooting for our ultimate win. However, that not how results work. It’s either Win, Lose or Draw. Especially in the world of betting, being realistic is as essential as weighing our possible options; before or after placing a wager. Now the question remains, how can we consider a bet that’s already placed. Enter Hedging. This technique is like a reward for all your strategic efforts up until now.

What is Hedging and Why should you consider using it?

This is a sports betting design to help you secure your wager and reduce the risk of loss or altogether guarantee a profitable outcome from your existing bet. In this strategy, a bettor places a second wager if they are not entirely aboard with the initial one. 

You might ask, why place two bets? Well, the second bet is more like insurance which assures you profit. Although, it may not be significant as your first wager. It does eliminate the aspect of a total loss, even if your original wager ends up losing.  

This technique can be applied in the following cases to minimize your risks.  

  • Odds have shortened or drifted after an initial back bet.
  • Odds have shortened or drifted after a lay back bet.

Regardless of the odds moving up and down, you can make profit from any hedge betting, however, identifying the market trend is crucial.

Understanding Hedging better with examples. 

Suppose you are backing your favorite team to win the Champions League. In the bet, you place $100 on Manchester United to win at 60-1. 

Potential Win: $6,000 + initial $100 bet.

Let’s say you decide to hedge your original bet, just in case the team doesn’t win in the finals. 

Hedge: $1,000 wager on Bayern Munich on the final day of the match. 

The original bet wins: Due to the safety wager (Hedge) you placed, you now only win $5000 in total. 

Hedge wins: Bayern Munich wins, the bettor wins $2000. After calculation, the final win is $900.

Worst case scenario, you decide not to hedge your bet and end up losing the initial bet too.  .

Calculating a back to lay hedge bet

Let’s say you made bet of £20 on New York Jets to win against the Los Angeles Rams at odds of 1.55. Just to stay insured you decide to place another wager. Hence you lay your bets at the odds of 1.33.

Question: How much to lay?

The calculation is pretty simple and straightforward.
Lay bet you need to place = (back price x back stake) / current lay odds

That is (1.55 x 20) / 1.33 = £23.31.

So, the lay the Los Angeles Rams £23.31. With a lay liability of £7.69.

In order to calculate the lay liability. You can use the following:

Lay Liability = (Backers Stake x (Lay odds – 1)

Now with another equation, you can also compute your total profit on the back to lay hedge bet.

Back Bet Profit

In order to calculate your back bet profit

= (back stake x back odds) – (lay liability) – (back stake)

= (20 x 1.55) – (7.69) – 20

= £3.31

In case your lay bet wins

Hedge Profit

= (lay stake – backers stake)

= £23.31 – 20

 = £3.31.

Now, let’s move towards calculating, a lay to back hedge bet.

Suppose you decided to wager on a horse racing. You lay a specific horse on $200 at the odds of 4.9. In this case, your lay liability is equal to $779.91.
The back odds are available at 7.2. The odds provided now are higher in contrast to the time when you place your original wager. Hence, a perfect opportunity for hedging.

How much to back?

To place the back stake, kindly use the following formula:

Back stake:

=(lay odds x lay stake) / back odds

= (4.9 x 200) / 7.2

= $136.11.

To back the horse, you can hedge your initial bet on $136.11.

Back Profit

In order to calculate your Back Profit
= (back stake x back odds) – (lay liability) – (back stake)

= ($136.11 x 7.2) – $779.91 – $136.11

 = $63.97

Lay Returns

To compute your lay returns,

= (lay stake – backers stake)

= $200 – $136.11

= $63.89

Conclusion

Overall, there is no exact time to hedge your bet. It depends on the amount you have risked and what are your final chances of winning. So, there is no wrong or correct answers. Nevertheless, it’s wise to consider your options before you decide on hedging or not. If you want to learn more on betting strategy, check out our article on Arbing.

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