Hedging Betting Term Meaning
Hedge your bets is a well-known phrase that means to reduce the risk, or even guarantee a profit. The term is not strictly reserved for sports betting but of course, it is more definitely applicable.
Hedging involves placing an initial wager then also betting on a different outcome or outcomes. The goal is to guarantee a profit irrespective of whether the initial bet wins or loses.
Hedging is quite similar to arbitrage betting, as both involve placing two or more bets on different outcomes to return a guaranteed profit.
The difference is that arbitrage betting involves hunting down discrepancies between the odds being offered by rival sportsbooks, whereas hedge betting is about taking advantage of changes in circumstances on a single bookmaker.
Let’s take an example from the 2020 UEFA European Championship. Wales would currently be an outside bet at 41.00, but a lot can happen between now and then. Let’s say you put a £10 bet on Wales, which would yield a return of £410 if they were to win.
Next, let’s assume that Wales hit a run of form and make it to the final against France, with France at odds of 1.85 to beat them. Do you sit tight, sweat it out, and risk losing your whole £410 payout if France win? Or, do you hedge your bet and guarantee a profit of over £178?
First, you have to divide the payout of your initial wager by the odds of the opposite outcome:
- £410 / 1.85 = £221.62.
That means you now place a bet of £221.62 on France to win. This might sound counter-intuitive, but it will ensure you walk away with that £178 profit regardless of who wins.
Here’s a table of information to explain how hedging works.
|Wales wins||£10 + £221.62 = £231.62||41.0||£10 x 41.0 = £410||£410 - £231.62 = £178.38|
|France wins||£10 + £221.62 = £231.62||1.85||£221.62 x 1.85 = £409.99||£410 - £231.62 = £178.37|
An important point to note here is that although you’re placing a bet of £221.62 on France to win, that money is not actually at risk. You will get it back, plus £178 profit, no matter what the outcome of the match is. The only money that was at risk was your initial £10 stake on Wales at 41.0.
What is hedging?
Hedging involves placing an initial wager and betting on a different outcome or outcomes to guarantee a profit.