We’ve probably all used the phrase ‘hedge your bets’ at one time or another because it can apply to many scenarios.
However, do you actually know what it means? and where it originates?
If not, we’ve got a complete guide for you. By the end, you should be comfortable with the phrase and all it’s meaning (inside gambling too).
Without further ado, let’s take a look!
Backstory: Where Did Hedging Your Bets Come From?
Thought to have been introduced in the 16th century, the phrase ‘hedging your bets’ first referred to covering all bases, limiting a loss in the process.
By covering multiple outcomes, we’re eliminating the risk from the scenario. Similar to arbitrage betting. While so-called ‘arbing’ relies upon finding mistakes in the odds of the bookie, hedging is available at any point. It doesn’t guarantee you a profit, just the opportunity to level your profit or loss at that point in time.
Originating from a gambling strategy, it’s also used in many places throughout life. Particularly the world of finance.
a ‘hedge fund’ mitigates the potential losses from investments with various other outlays.
Already, if you’re familiar – you can see how this is relative to anyone that makes money through matched betting.
Why Hedge Betting is Useful…
Before we launch into all sorts of examples and finer details, why should we use hedge betting in the first place?
- Reduce Risk: First and foremost, the main reason to use this strategy would be to reduce the risk of betting and minimise all losses at any given point in time. If you place a bet and suddenly lose confidence, whether, through a change of heart or something occurring to shift the dynamic of the event, this can be a great strategy. Rather than wasting your whole wager, you can hedge the other outcome. In this scenario, you’ll make a loss but it’ll be much smaller than allowing the bet to run and losing the initial result.
- Guarantee Profits: If used cleverly, there may also be opportunities to guarantee a profit. For example, what if you placed money on a certain team to win the FA Cup at the start of the season? Once they reach the final, you could hedge the other team and, as long as you get the stake right on the second bet, you’ll stand to win money before the event even begins.
- Boosting Accumulators: Although this fits into the previous point, we feel as though it deserves a section of its own because accumulators are now huge business in the world of betting. Ever been let down by one outcome? In truth, most of us have so, if you have just one fixture or event left to go to win, why not hedge on the opposition so you at least guarantee a profit? Compared to an accumulator, the stake will have to be quite high but it means you don’t have to rely on the last team in your bet to cross the line to make money.
Hedge Betting Example:
For professional gamblers, hedging is a valid technique for both making money and knowing when to minimise losses.
Back in 2004, Greece shocked the continent by beating Portugal in the final of Euro 2004. Although they were longer at the time of the tournament, let’s say we backed Greece at 40/1 before the tournament started.
As they reach the final, we would be just one game away from winning £2,000. However, Portugal is clear favourites and therefore a more likely winner; despite choosing an outsider and following their journey for two weeks. Before the game, we’re nervous and starting to question whether Greece can really do it?
Therefore, we decide to hedge with Portugal. Just before the game, Portugal are 4/5 to win the game. Compared to the initial bet, the amount we have to stake will be significantly higher but we can guarantee a profit here. For example, a £1,000 stake will return £800 in profit. With this bet in place, we can’t lose money (as long as you bet for Portugal to win the TOURNAMENT and not the game so you don’t get messed around by extra time).
If Greece wins, we make £2,000 minus the £1,000 Portugal stake. If Portugal wins, we make £1,800 minus the £50 Greece bet. Depending on the circumstances, you can make adjustments to the formula. As it went, Greece lifted the trophy and some people made money while others lost out on huge amounts. However, if Greece were missing three of their biggest players, you might increase the stake on Portugal to lean the profit more towards one than the other and this is called ‘Adjust Hedging’.
Often, people feel as though they have to hedge in a way that makes the profit of both sides as close to equal as possible. If you really aren’t sure which way an event will go, this is a fine tactic. This being said, this is still betting so feel free to have more profit waiting in the outcome you think will happen with a smaller profit waiting on the less likely outcome.
In recent years, ‘in-play’ has become huge. The assistance of advanced betting tools such as the Geeks Toy has made it easier to win, regularly.
This is especially true for the major betting sports including football and horse racing. As the events in a football match change, for example, the odds will change because certain outcomes become more/less likely. If you decided to back the underdog before the game and they take the lead, you can then hedge the favourites to come back and win with some of the potential profit you’re set to win.
Pros and Cons of Hedge Betting:
To finish, let’s take a little look at the pros and cons of hedge betting; should you try this technique in the coming weeks?
- PRO – Flexibility: Firstly, hedging increases your flexibility in the betting world and, let’s not forget, ensures a profit or helps to at least minimise a loss. If you’re one outcome away from winning an accumulator, you don’t have to nervously wait for the final result to come in because you can hedge and guarantee a profit before the event starts.
- PRO – Stay in the Game: By minimising losses, you keep some money for future betting. As opposed to losing all your money and having to deposit again, hedging allows you to see some money returned and you live to fight another day.
- CON – Losses: Sometimes, it’s impossible to avoid the loss and this is important to note. Even in situations where we said you should guarantee a profit, you might find the odds not playing ball and this could halt your strategy.
- CON – Minimising Profits: Finally, you could actually be minimising your losses if your initial bet goes on and wins as you predicted in the first place. However, there’s a ‘risk v reward’ type feeling in that the peace of mind is better than risking everything and…well, losing everything.
Hedge Betting Final Note:
There we have it, your ultimate and complete guide to hedge betting and ‘hedging your bets’.
If you manage to do it correctly, hedge betting can be very lucrative. Catch it wrong and you may have to settle for a loss. To effectively hedge your bets, it’s important to have a strategy. Much like professional Betfair traders do.