The question of whether or not to hedge a bet gets asked of me quite often. More often than not the answer for me is no but it is not that cut and dry. You really need to look at each case on an individual basis.
The reason I usually reply with a "no" when asked the hedging question is just about every bet you make with a sportsbook has a negative expected value (EV). That is unless you have a model or system that flips your EV to positive. In a hedging situation, you are betting against your system that told you to make the bet initially. If you are a +EV player and this bet was presumably +EV then why take the other side which is not only -EV for the average bettor but presumably even greater -EV being that it is on the other side of a sharp +EV bet?
Here is a real-life situation I am faced with today. If you followed my plays from yesterday you know we had pretty good success with the teasers. I mentioned in that video that you needed to be on the lookout for games that could dip from +3 to +2.5 to take as a potential teaser. I wound up having teasers with the NY GIants, Houston, Tennessee, LA Chargers, Buffalo, Washington, New England. The only loser was Washington. I played these in 2 game teasers and a few 3 game teasers at +165. I have six live 3 game teasers with Tampa Bay +8.5 as the final leg. The question becomes, do I hedge?
Without doing any calculations if all things are the same then hedging is going to reduce my EV. It has to because I am now paying juice on the hedge bet. But what if the line has moved in my favor? Currently, Pittsburgh is -2 -110 and -130 on the money line.
Let's run through the math and see what makes sense.
These teasers were placed to win $500 with a risk of $303 on each teaser. I have 6 teasers alive with TB +8.5. First, we want to figure out my EV if I do nothing.
You will have to take my word for it but these games that cross the 3 and 7 win at about 75% of the time.
75%(total amount won if Pitt does not cover 8.5) + 25%(total amount lost if Pitt covers 8.5)
(.75*3000) + (.25*-1818)
2250 - 454.5 = $1795.5
If we get in this situation hundreds of times we can expect to return on average $1795.5 each time. But tonight I won't be getting back $1795.50 I will be winning $3,000 or losing $1,818.
If I hedge so that my risk is 0 what would that look like?
To do this I can play Pitt -2 -110 which is .5 point better than yesterday when the teaser was bet. That will surely make hedging a bit more attractive. We do another EV calculation to figure out if we want to make this play. The problem is how do we figure out the probability of each outcome? First, let's figure out what each outcome could be.
Outcome 1 - Pitt wins by more than 8.5 points
Outcome 2 - Pitt wins by more than 2 and less than 8.5 points
Outcome 3 - Pitt does not cover the 2 point spread
Outcome 4 - Pitt wins by 2
If we determined previously that the teaser will win about 75% of the time we know outcome 1 has a probability of 25%. Outcome 3 is a bet ATS. Those bets are historically 50% so Pitt not covering has a 50% chance. But there is a chance of a push which is outcome 4. Games end on two 3.8% of the time. So Pitt covering or not is 48.1%. That leaves outcome 2 with a 23.1% chance of occurring. Once we have that figured out the calculation is simple. Assume a bet of 2000 to win 1818 on Pitt -2.
Outcome 1: 25% chance of losing $1818 on the teaser and winning $1818 on the hedge. Net 0
Outcome 2: 23.1% chance of winning $3000 on the teaser and $1818 on the hedge. .231*4818 = $1112.96
Outcome 3: 48.1% chance of winning $3000 on the teaser and losing $2000 on the hedge. .481*1000=$481
Outcome 4: 3.8% chance of winning $3000 on the teaser and pushing the hedge. .038*3000=$114
0 + 1112.96 + 481 + 114 = $1707.96
If we take this bet we lose about $87.54 in expected value.
We should look at the money line to see if that offers a better opportunity. Pittsburgh is -130 with Tampa +120. If there were no juice on this bet we could assume the line would be +-125. A -125 favorite has a 55.6% probability to win the game.
Outcome 1 - Pitt wins by more than 8.5 points
Outcome 2 - Pitt wins but by less than 8.5 points
Outcome 3 - Pitt loses outright
Outcome 4 - Game ties
Outcome 1 hasn't changed and is still 25% likely to happen. Outcome 3 we know to be (100%-55.6%)= 44.4%. Outcome 4 the probability is close to 0 on ties, especially in preseason when coaches will play for a win more often so they do not have to play OT. That leaves 30.6% chance of outcome 2.
Let's assume a bet of $2363 to win $1818 on Pitt ML -130.
Outcome 1 - Lose $1818 on teasers and win $1818 on Pit. Net = 0
Outcome 2 - Win $3000 teasers and win $1818 on the hedge. Net .306*4818=$1474.31
Outcome 3 - Win $3000 teasers and lose $2363 on the hedge. Net .444*637=$282.83
Outcome 4 = 0
0 + 1474.31 + 282.83 + 0 = $1757.14
Making this hedge play will cost us about $38.36 in EV.
Betting Pitt on the -130 ML is more advantageous when compared to the spread bet. Whether you want to give up some EV here is really your call. What you are doing here when you hedge is giving up some value to minimize variance. I am ok with paying up a small fraction of your risk to keep the variance to a minimum. Ultimately you need to make that decision. In this situation, because the line moved slightly in my favor I went ahead and hedged the money line to reduce some risk.