Hedge: Verb. To protect oneself against loss on (a bet or investment) by making balancing or compensating transactions.
A successfully executed hedge is the holy grail of betting and/or investing. It allows the investor to win profit regardless of an outcome. The hedge’s only requirement is a change in price and great timing.
A simple hedge could be described as such. Rafal Nadal meets Novak Djokovic in the final of the French Open. Rafa is the favourite at $1.55, but you fancy an upset and place $100 on Novak at odds of $2.35. If Novak wins the match you stand to collect $235 with a profit of $135. Novak comes out firing and wins the first set. Nice. We are on track. The odds of the match now swing. Rafa looks a little weary, and punters are wondering whether he really has 4 or 5 tough sets in those old legs? Rafa’s odds drift to $2, opening up hedging possibilities and we pounce, taking the sweat out of the bet by placing $100 on the old boy to turn the tide. We have now invested $200 in total and stand to win $35 in Novak comes home, and break even if Rafa turns it around. We have sacrificed a much larger Novak payout for peace of mind, we cannot lose on the match. We settle back and watch the game and our win/win.
Sports bet hedging is perfect for contests that involve swings in lead or momentum. 20/20 cricket is a prime example. During key overs, the price will swing wildly on each ball delivered. The fall of an important wicket will see the odds of the batting team shoot skyward, while a well-timed straight drive that clears the boundary will see the odds of the bowling team lengthen markedly. A wild swing that misses and results in a dot ball will see the odds tighten slightly for the bowling side. A single over can be a white-knuckled ride of manic ups and downs, presenting opportunities for both triumph and disaster.
Sporing teams that start quickly but have a history of slowing late in the contest provide prime hedging opportunities. Young AFL sides that lack hard seasoned bodies are especially prone to dropping off late in the contest, but if they are 20 points clear at quarter time a bet can be placed on their opponent and the hedge is complete.
Unfortunately for Australian gamblers, archaic, nanny-state laws require in-play bets to be placed via the telephone, a process that takes precious minutes, severely cruelling gambling opportunities that swing in mere seconds. Some punters have been known to use a VPN to disguise their location and get around this ridiculous legislation. Gambling is a cut-throat competitive game, and if punters based in the UK are able to wager at the click of a mouse, Australians have very little hope of prevailing. Australian corporate bookmakers are also infamous for having a heart the size of a pea and will cut winning punters like a gardener wielding a set of hedge trimmers. Betfair, an international betting exchange that acts as a middleman between buyers and sellers is where the real hedging action can be found.
The same concept applies not just to tennis or cricket, but to the price of gold, oil, AUD/USD, bitcoin, wheat, coal, pomegranates, whatever. Anytime a fluctuation in price eventuates, hedging opportunities arise. Miners hedge relentlessly against falling prices that will destroy their profit margin. If it is costing a miner $1000 to extract an ounce of gold, they may be inclined to set up bets that will start paying out at that price and below to protect their margin. Glencore, a somewhat shadowy Swiss miner, seems to exist purely to bet on the price of the minerals it extracts from the ground. Volatile commodities like bitcoin provide huge opportunities, with its meteoric rises and falls making and breaking millions.
If you are serious about profiting from sporting contests become a hedger, a free-roller who takes the sweat out of results by betting both ways when fluctuations in price occur.
AMG supports responsible and rational gambling.