WHAT IS HEDGING A BET?
The first thing we want to do is discuss what hedging is. Hedging is a tool that gamblers use to either limit their downside or guarantee themselves a small profit regardless of the outcome. In order to hedge, you need to have a futures bet where the team is still alive in the playoffs to cash it. At the start of any season, every team is theoretically alive to win a championship. Every team is available to bet on early in a season, from favorites to longshots. As the season goes on, the odds change based on how well or how poorly a team is playing. Some teams are eliminated from contention, which makes the potential pool of winning teams smaller.
Every series of the playoffs, we have one team move on and one team go home. That means every round the number of potential winners gets cut in half, and as teams get closer to winning the prize, the odds continue to dwindle. A team that was 20-1 to start a season may only be 5-1 if they are one of the last four teams remaining. Unless they win it all though, you do not get paid on the 20-1 ticket you were holding from the start of the year, nor the 5-1 you could get betting on them closer to the title game.
If that 20-1 team does end up making it to the finals and you are holding a ticket, you now have some options. If they are favored to win the championship now, you could see a situation where you are holding a 20-1 ticket and now have an opportunity to bet some amount on the other team that guarantees that in the worst case you break even or make money no matter who wins. This bet taking the opposite side of your original play is what gamblers call hedging.
WHEN SHOULD I THINK ABOUT HEDGING?
Hedging is a lot like the pirate code: It’s more of a list of guidelines than hard and fast rules.
It is also a decision that has a lot of angles to consider. Here is a list of those considerations to think about before you go ahead and give up some potential profits.
