Sports Bet Hedging: Minimizing Risk
What exactly does hedging mean, and how can you use it to your advantage? Just like hedge funds on Wall Street, sports bettors can use hedging techniques to minimize potential losses and secure profits regardless of game outcomes.
What is Hedging in Sports Betting?
At its core, hedging is a simple yet powerful strategy: betting on opposite sides of a market to ensure you don't lose money. The fundamental principle is to create a betting scenario where you're protected regardless of the outcome.
The Basic Hedging Formula
Throughout this guide, we'll use a simple formula to calculate hedging:
Payout = Stake + Profit
The key to hedging is balancing the payouts of two bets so that you do not lose money regardless of the outcome.
Different Hedging Methods in Sports Betting
There are several approaches to hedging in sports betting:
- Bonus Hedging
- Low-hold Hedging
- Arbitrage
- Parlays (which we'll save for another post)
Let's dive deep into these strategies, focusing on bonus hedging and straight-bet arbitrage.
Bonus Hedging Techniques
1. Bonus Bets
Bonus Bets are the most common type of sportsbook bonus. Here's how they work:
- You use Bonus Bets instead of cash as your stake
- If the bet wins, you get the profit, but the stake is $0
- Profit and payout are equal when Bonus Bets win
Bonus Bet Hedging Example
A $100 Bonus Bet on the Pistons at +550 odds pays out $550.
$550 = $0 + $550
To calculate a balanced hedge, keep the payout the same and work backwards using the opposite bet. I've rounded the numbers to keep it simple:
$550 = $485 + $65
By hedging $485 on the Thunder, you lock in a $65 profit regardless of the game's outcome.
2. No Sweat Bets
No Sweat Bets work differently:
- If your bet loses, you get your stake back as a Bonus Bet
- You need to account for the expected value of the Bonus Bet when calculating your hedge
Expanded formula:
Payout = Stake + Profit + Bonus
Assuming a $100 Bonus Bet is worth $70 when converted to cash, you now also win money from losing the bet!
Payout = $0 + $0 + $70
The trick is to balance the hedge to account for this extra value.
3. Bet-and-Get Promos
These promotions work similarly to No Sweat Bets:
- You get a Bonus Bet regardless of the game's outcome
- Profit is based on the value of the Bonus Bet
Bet-and-Get Hedging Example
Consider a "Bet $100 Get $100" promotion on Lakers vs. Celtics:
- Lakers are favorites at -120 odds
- Celtics are underdogs at +100 odds
The stake is $100 in order to use the promotion, so betting on the Celtics gives us:
$200 = $100 + $100
And a balanced hedge on the Lakers:
$200 = $109.09 + $90.91
Without the bonus, this isn't worth hedging. You are locking in a $9.09 loss. However, with the $100 Bonus Bet (worth $70), the bonus on the whole gets you $70 - $9.09 = $60.91 profit.
4. Profit Boosts
Profit Boosts are straightforward:
- They change the odds in your favor.
- A 50% Profit Boost on +870 odds changes them to +1320, and then you hedge normally.
Hedging Without Bonuses
Low-hold and No-hold Bets
- No-hold bet: Odds sum to exactly 0 (-105 + 105 = 0)
- Low-hold bet: Odds sum to slightly less than 0
These are useful for earning reward points or taking advantage of cashback offers with minimal risk of getting your accounts limited. Using our affiliate GBank credit card to get 1% cashback on your deposits and then placing the above two bets nets you $2.05 cash back + DraftKings rewards points.
Arbitrage
Arbitrage happens when the odds sum to more than 0 (+120 - 115 = 5). This means you can collect a profit even without rewards or cashback. In the screenshots above, you win $5 if Jokic has at least one block, and break even if he doesn't.
There are two kinds of arbitrage:
- Static Arbitrage: Place both bets simultaneously
- Dynamic/Statistical Arbitrage: A more advanced technique involving future odds movements. You place one bet before there is an arbitrage opportunity, with the intent of hedging it later if/when the odds move and there is an arbitrage opportunity. This is common on Wall Street but rare in sports betting, since using a simpler +EV strategy performs better for straight bets.
Final Thoughts
Hedging in sports betting is a nuanced strategy that requires careful calculation and understanding of odds. While it can help minimize risk, always bet responsibly and within your means.
Disclaimer: Sports betting carries financial risks. This guide is for informational purposes only and does not constitute financial advice.