From the world of finances to casino games, hedging is a key strategy applied across the board by professional bettors as a means of reducing risk and securing winnings. Here’s how to use hedging in the outright sports betting markets to secure profits.
Predicting the outright winner in a future market is not easy. Even in cases of a clear favourite, like Djokovic to win the ATP US Open 2016 (1.943*), betting on the market leader involves tying up a significant amount of your bankroll for the duration of the tournament, at a high risk and for a relatively small reward. Unattractive? I thought so.
Rather than looking directly at identifying the winner of a competition, this article explains how you can make a profit in the outright markets even before the competition is over by using the hedging strategy.
Hedge to guarantee profits
The concept of hedge betting involves placing bets on a different outcome, or outcomes, subsequent to an original bet in order to create a situation where there is a guaranteed profit, irrespective of whether the original bet wins or loses.
For those familiar with arbitrage betting, that also involves placing two or more bets on different outcomes for guaranteed profits, there is a key difference between the two strategies. The purpose of arbitrage is to spot discrepancies between the odds offered by different bookmakers and place bets on all possible outcomes accordingly.
Hedging, on the other hand, is based on taking advantage of changes in circumstances and requires only one account, preferably with a bookmaker who welcome winners like Pinnacle. Here’s why we accept winners.
Hedging in practice
Hedging a bet on the winner of a tennis tournament is one of the most common uses of the hedge betting strategy. Before using it though, you should understand what it takes for the strategy to be successful. Let’s take the example of the WTA Wimbledon 2015.
Hedging involves placing bets on different outcomes in order to secure a guaranteed profit irrespective of whether the original bet wins or loses.
Garbiñe Muguruza, the Spaniard who had not gone beyond the second round in her two previous visits to the All England Club, surprised everyone when she managed to dispatch Radwanska and win a place in her first ever Grand Slam final against Serena Williams.
The meteoric rise of the 21-year-old, however, was hardly out of nowhere. Muguruza had beaten Williams handily in the second round at Roland Garros in the year before and went into Wimbledon perfectly fit. The markets, however, failed to see a star in the making, with the Pinnacle Sport’s opening line for Muguruza to win the title at 41.00.
Let’s say, for the sake of this example, that you had placed a bet of $10 on Muguruza to win Wimbledon at the opening odds. That would give you a return of $410 if she won the tournament. As the Spaniard progressed from round to round and reached the final against the Number 1, the odds for Williams to win the final (and therefore the tournament) were at 1.85, providing an ideal opportunity for locking in profits irrespective of the final outcome.
To achieve a balanced return regardless of which player wins, you have to divide the return of the initial bet by the price of the opposite outcome, i.e. 410/1.85 = 221.62. Here’s how the calculation of profit works:
|Outcome||Total amount wagered||Odds||Return||Profit|
|Muguruza wins||$10 + $221.62 = $231.62||41.00||$10 x 41.00 = $410||$178.38|
|Williams wins||$10 + $221.62 = $231.62||1.85||$221.62 x x1.85 = $409.99||$178.37|
The above example illustrates how the correct assessment of the performance of a player offered the opportunity of a guaranteed profit in the outright market of the Wimbledon, allowing you a profit of more than $178 for a risk of only $10, as well as the luxury to enjoy the final safe in the knowledge that you are already a winner.
Adjust hedging in your advantage
To make things more interesting, hedging allows you to distribute the risk, and hence your winnings, based on your judgment regarding the final outcome. Let’s say, for example, that you believed Williams would win the final and wanted to secure a higher profit, if that scenario materialized. For that, you would have to increase the amount bet on Williams. Here’s one way to distribute the profit in favour of the outcome Williams to win by placing $300 on Williams at 1.85 ahead of the final.
|Outcome||Total amount wagered||Return||Profit|
|Muguruza wins||$10 + $300 = $310||$410||$100|
|Williams wins||$10 + $300 = $310||$555||$245|
In the above scenario, you make a net profit of $245 without having increased your risk of $10. Had you bet the same amount on the opening line for Williams to win the tournament at 3.50, that would have given you a mere profit of $25 and a bit more of a headache until she secured the title.
Who can challenge Djokovic (1.943*) and Williams (2.35*) at the US Open 2016? Get into the betting action now!
*Odds subject to change