vanzack's Blog

Most of the time, hedging a parlay is a very bad bet....

By vanzack | View all Posts
Posted Friday, July 25, 2008 08:02 AM

12 comments

Yesterday there was a thread about hedging a parlay, as there is at least 5 times a week every week. I am constantly amazed at just how many people assume that hedging is a good practice. At least 90% of the people here – when asked – give the advice to hedge the last game of a parlay.

For those interested, here is the math, and the reason that it is dumb to hedge.

The first situation is what the poster yesterday did, as he parlayed teams on 2 different days. His first 3 teams were on Sunday, and his 4^th team was on Monday. This is a big no no. He would be much better off betting a 3 team parlay on Sunday, and then rolling all of the proceeds in to a straight bet on Monday:

Option 1: Bet a 4 team parlay at 10-1. Bet 100, win 1,000.

Option 2: Bet a 3 team parlay at 6-1, bet all proceeds straight up on Monday team. Bet 100, win 1,336.

Option 2 makes you MUCH more money (1,336 vs 1,000) on your 100 dollar bet. This is a no brainer.

The second situation is the one always talked about here and is the one that is most misunderstood. If you have already put a team in a parlay, and nothing has fundamentally changed with the line or game situation, you have to pay a tax to hedge (vig). So if you know you are going to hedge, don’t bet the last team in that parlay to begin with. Here is the math:

Option 1: Bet a 4 team parlay and hedge the last game.

You bet 100 to win 1,000 on a 4 team parlay, the first 3 win, and you decide to hedge the last game. The last game is Miami vs Philly and the line is the same as when you bet it, Philly is -3. You have Miami +3 on your parlay, so you hedge by betting 576 to win 524 on Philly at -3, afterall – you are guaranteeing yourself money right? So now if Philly wins you win 424, and if Miami wins you win 424. So you win 424 either way, you have hedged, and you think you did the smart thing.

Option 2: Bet a 4 team parlay and don’t hedge the last game, and ride it out.

You bet 100 to win 1,000 on a 4 team parlay, win the first 3 games, and let it ride out. If the last game has a 50/50 expectation, you will win it half the time and lose it half the time. So your expected value on letting it ride is 500.

Option 3: Realizing you are going to hedge the last game of your 4 team parlay, you just bet a 3 team parlay instead.

You bet 100 to win 600 on a 3 team parlay because you know you like to hedge. You win your first 3 games and win 600.

So in summary here are the expected values in this situation:

1. Hedging 424

2. Don’t hedge 500

3. Leave the last game off of the parlay 600

Hedging is clearly the worst alternative unless something has fundamentally changed such as the line, injuries, weather, or your financial situation has created utility that you cant pass up. But if you are saying to yourself before you bet the parlay that you are going to hedge the last game – JUST LEAVE THAT GAME OFF OF THE PARLAY IN THE FIRST PLACE. And if you find yourself in the situation of last nights poster, where you have won the first games and are down to one game and are considering hedging, UNDERSTAND THAT HEDGING COMES AT A PRICE, YOU WILL PAY EXTRA IN ORDER TO HEDGE.

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mooose24 says:

07/25/08 09:28AM

I was just reading this post and it made a lot of sense to me. But then it got me thinking (I know this can be dangerous). You mentioned that you would be better off betting a 3 team parlay and then letting the winnings ride on the 4th game, for a more profitable outcome, which I totally agree with. However, with that theory, why not just let your money ride for 3 or 4 games instead of doing a parlay. For example,

4 team parlay pays 10-1, 100 bet equals 1000.

4 games letting it ride pays;

Game 1-100 pays 90.91

Game 2-191.91 pays 173.55

Game 3-365.46 pays 332.24

Game 4-697.70 pays 634.27

For a total payout of $1331.97 vs $1000 for a 4 game parlay.

I understand that games may be on at the same time, which would prevent this. I would be interested to here other's thoughts on this. mooose

kamahsutra says:

07/25/08 09:36AM

I would have to somewhat disagree here. I do agree that if you don't have a strong feeling for the play or if the fundamentals for the play aren't there, leave it off the parlay, and that is the best option.

However, even if those fundatmentals are there, in a 4 game parlay scenario what are the probalities that you go 4-0 on any given day? Not very likely. Just by the laws of distribution, the vast majority of the time you'll end up being somewhere in the middle. We all know that even if you're going 3-1 everyday (on straight bets), you'll not have to work another day in your life. So the fundamentals for that last game have not changed at all, you're just asking yourself: what the probablities of you going 4-0 that day, and working out the math on how much you're willing to hedge.

Bailing on a parlay is not greed. That statement in itself is contradicatory. When you're hedging, you're conceding some back to lock in what you're already won on paper. Wouldn't risking all or nothing to be of more greed???

At the end of the day we know parlays are suckers bets, but some of us just can't resist.

mooose24 says:

07/25/08 09:57AM

While we are the topic of "suckers bets", which I totally agree that parlays are, I rarely bet them, Unless I am feeling like an action junkie. What are your thoughts on teasers? i think they are a worse bet than parlays, but I have a degenerate friend that I debate with because he takes 7.5 pts two team teasers paying -130. How can this be profitable? I am more of a value bettor and a contrarian, while he is the typical, only bet the favorites bettor, I do not know how many times I have heard him say "They cant lose to that team!" Guess who lost!

vanzack says:

07/25/08 11:37AM

Moose - the reason as you state is because games are at the same time. You are always better betting multiple games as rollovers rather than a parlay, but most like to bet games that are going at the same time. The exact example above had a guy bettting 3 games at the same time, and then putting in his 4th game of the parlay for the NEXT DAY!! That is just stupid.

Kamasutra - your idea that going "4-0 in a day is not very likely" is absolute psychological mindfuck. The arbitrary time period of one day is put there by you, not by statistical distribution. After winning 3 games, the odds of winning the 4th game is independent - by that it means that the 4th game winning or losing has no bearing on the first 3 winning - so your example has no statistical bearing. And BTW - your thinking is also most peoples thinking and one reason so many gamblers do the wrong thing.

drudatt108 says:

07/25/08 11:38AM

Hey vanzack, I'm new to the site and the hedging caught my eye. I'm not exactly sure what it means, but it sounds like something I've done repeatedly over and over and over and over again, expecting a different result if you know what I mean. I'm not the biggest math guy around but I know that I've lost more than I'd like to mention by hedging that last game. I did cut my 4gamers down to 3 and upped my dough. Surprise, suprise I finally cashed in. Tell mr. guaranteed $ fan I'd like to trade with him and do his job!!!!

vanzack says:

07/25/08 11:39AM

BY THE WAY....

IF YOU WANT TO READ THE EPIC THREAD ON THIS SUBJECT (about a year old) HERE IS THE LINK....

http://www.covers.com/postingforum/post01/showmessage.aspx?spt=21&sub=740779

drudatt108 says:

07/25/08 11:54AM

Is it to hedge or not to hedge?

bej0101 says:

07/25/08 01:18PM

on any parlay of 3 or more teams ALWAYS hedge for a guaranteed winner/push..at the very least hedge the amount of the bet to break even..how many times have we been in that situation and lost the original bet on the last game..hedge at least the wager says i...........

kamahsutra says:

07/25/08 01:54PM

vanzack,

I had a long reply long reply written prior to seeing the link that you had just posted. Reading through most of the thread, I see no point in posting a long reply as everything has been beaten like a dead horse on that thread. As some of the posters agreed with you, but you're caught up in semantics, and the arrogance of your correctness. Like you said, (and I've agreed) the 4th outcome is independent and is still a 50/50. Bottom line is that some people chicken out and hedge after seeing that they've already won a significant portion, and some let it ride. It's just a matter of personal preference, and how much testicular fortitude a bettor has, and what they want to do at that point. No more replies to this beaten dead horse of a topic.

dyamarik says:

07/25/08 02:00PM

Van - you are completely correct. However, I do disagree with your feedback to Kamasutra.

Statisically, yes, each game is independent of any other. However, the person making the plays inherently skews his picks to his favorite teams/angles/formulas or whatever else the average capper does to pick his winners (or losers). That in of itself does not make for a truly "random" scatter of results you would get if you were flipping a coin to place each bet, and thus does lend credibility to the 3 out of 4 scenario.

If the capper picked parlay based on 4 totally random selections, then your wisdom is dead on. If not, then you lose that randomness, and based on the average cappers W/L records, 3-1 is a more probable outcome given that his record will more often revert to the average winning percentage of that persons system.

Every capper has tendencies, and those tendencies skew your picks away from a normal, random sequence. Moral of the story - BET STRAIGHT UP...!!!

Peace.

DiverRon says:

09/28/08 09:53AM

Very true, God Info., Sound Advice!

peanutt612 says:

10/18/09 03:58PM

So What Do You Say To Them On Monday When They Don't Hedge And Lose Their Initial Bet? Oh Well You'll Get It Bak Nextweek. No Disrespekt To Your Infomative Post I Just Look At This As Gambling And If Given The Opportunity To Make $ Regardless Of The Outkome I'm Gonna Hedge. Unlike The Stok Market You Kan Only Hold On To A Football Bet For 1 Day But You Kan Hold On Too Stoks Until You Die . Just My Opinion.

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Most of the time, hedging a parlay is a very bad bet....

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