Should you hedge your bets?
The term 'Hedging Your Bets' or Hedge Betting basically involves placing multiple bets within the same market on various potential outcomes, taking advantage of variations across the market. This technique acts as an insurance mechanism when done correctly, and can minimise and potentially eliminate the chance of losing, with the bettor able to guarantee a return before an event has finished.
You have probably heard the term 'hedge your bets' used in everyday life. It is a phrase that denotes caution. To hedge your bets is to protect yourself from making a bad choice or decision. You may hedge your bets when you are at work by requesting more budget or time so you know you will have what you need to complete a certain project. So, what does hedging your bets mean in the world of betting?
What is hedge betting?
As with its idiomatic use, hedging your bets in betting (sometimes referred to as hedge betting) means to cover more than one eventuality so that you do not lose too much money if your original bet doesn't come off. Let's look at an example to gain a clearer understanding.
Imagine that Liverpool are playing Paris Saint Germain in the Champions League quarter finals. In our example, a bettor has placed their bet on Liverpool winning, but as the kick-off looms they are not sure it will come off. Both teams are in good form, leading their leagues by significant margins and have star players who can completely change games in an instant; the match is very difficult to accurately predict. Our bettor is having doubts, so they change their mind and place a second bet; one on Paris Saint Germain to win.
They have now hedged their bets. This is because even if the original bet does not come off and Liverpool lose, the bettor will still earn some money because of the second bet on PSG. In other words, they have mitigated some of the risk of the Liverpool win bet failing.
What are the Pros and Cons of hedge betting?
Let's deal with the cons first of all. The obvious one is that two contradictory outcomes cannot possibly take place in a match; both Liverpool and Paris Saint Germain cannot win. This means that hedging your bets guarantees that you will lose one of the bets and therefore lose some amount of money. So, hedging your bets somewhat goes against the very essence of betting, which is to make money.
However, this is where the pros of hedge betting come in. If the original bet on Liverpool loses without the second bet to back it up, the bettor loses all that stake. With the second bet placed on PSG, those losses will be diminished, so if the worst happens, the bettor will not experience quite such a bad hit to their pocket.
Hedging your bets can also take place in play. Perhaps the bettor is quite happy to stick with their original bet before kick-off, but by half-time their feelings have changed. PSG are on-form and much the more likely to win, and Liverpool's star man has been taken off injured leaving them toothless up front. A Liverpool win is now looking less likely than it was before the match, so a second bet is placed early in the second half to settle the bettor's nerves and cover the possibility of a PSG win. Again, our bettor has hedged their bets.
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Hedge betting vs cashing out
In this example, hedging your bets is somewhat similar to the cash-out option, with a couple of notable differences. First, whereas the cash-out option is instigated by the bookmaker, who decides what to offer and when, a hedged bet is instigated by the bettor, who decides what extra bet they want to place and when. Of course, if the bookmaker you use does not offer in-play betting, hedging your bet during the match would be impossible and you would have to place additional bets before kick-off.
Secondly, whereas hedging your bets is a defensive measure, cashing out is a little more proactive and can make you more money. Hedging means you are simply mitigating a potential risk and reducing the possibility of suffering a damaging loss; you are saving a little bit of money. Cashing out does not do that; instead, it can allow you to get a healthy sum of money, even if it is likely to be less than what you would make if you were to see your original bet through to its conclusion.
So, which is the better option for a bettor who wants to cover the possibility of losses: hedge betting or cashing out? There is no hard and fast rule that you can use every time you place a bet. Every instance must be taken on a case by case basis, as the circumstances can change dramatically. What is for certain across each and every case is that it is important for you to manage your emotions, and study the game and the teams carefully.
Just because Paris Saint Germain are in the ascendency does not mean it will stay like that and they will go on to win. Just because Liverpool are struggling does not mean that they can't hit their opponents with a sucker punch. Do not over-react to the events of the match and make a bad decision (whether it is cashing out or hedging your bets) just because things are not going quite as you foresaw at that particular moment in time. Take your time, think things through carefully and come to a decision that you feel is right for you.
Ultimately, hedging your bets is all about risk and reward, and like the cash-out option, it can sting you as well as help you out. To get the most out of it, you should take care making your decisions and not rush in to anything that you may look back on later with regret. Sure that second bet could save you a large loss, but it could also cause you to miss out on the entirety of a nice win unnecessarily. Done well, hedge betting can be hugely impactful; done poorly it can be very costly indeed.