Hedge your bets is a phrase used in gambling and finance. It means to reduce risk and sometimes guarantee a profit.
This can be done by betting on different outcomes so that no matter what happens, you secure a financial outcome.
For example, if you bet on a football team to win, but then they start to lose, you can bet on the other team to make sure you don’t lose all of your money. Bookmakers also use hedging to limit their risks. It’s the smart thing to do!
There are even calculators to help you figure out how much to bet.
A Hedge Betting Example…
Imagine you bet £50 on Man City to win their upcoming match against Arsenal at odds of 2/1. This means that if Man City wins, you will receive a payout of £150 (£50 x 2 + £50). However, as the match progresses, it looks like Arsenal might win instead (unlikely I know). The odds for Arsenal to win are currently at 5/4 (2.25 in decimals).
To hedge your bet, you could place a £66.67 bet on Arsenal to win at this price. If Arsenal or Man City wins, you receive a payout of £150 on the corresponding line. After deducting the original betting stakes, you would have made a total profit of £33.33 regardless of the final score.
Plus you reduced your immediate risk by ‘hedging your bets’.
How to Calculate a Hedge Bets Stake:
The formula to calculate the stake for hedging a bet is relatively simple, it goes like this:
- Determine the potential payout of your original bet if it should win.
- Find the odds of the opposite outcome.
- Divide the potential payout of the original bet by the odds available on the second bet.
This result is the recommended stake for the hedge bet on the alternate outcome.
The numbers in our previous example:
You bet £50 on Man City to win at odds of 2/1, the potential payout was £150. The odds for Arsenal to win are currently 5/4 (2.25).
So, to calculate your hedge bets stake…
£150 / 2.25 = £66.67
To clarify, the two potential bet lines would look like this:
- If Man City wins, you’re returned £150, minus the two stakes of £50 and £66.67, a total profit of £33.33.
- If Arsenal wins, you’re returned £150, minus the two stakes of £66.67 and £50, a total profit of £33.33.
Learning to hedge your bets properly is crucial if you’re manually trading on sports or arbitrage betting. Check out the following article for more help…