Hedging: Monday Night Football

Hedging is a concept that is often used in finance, but applies to sports betting or "sports investing" as well, and presents a profitable strategy to decrease risk or create arbitrage opportunities.

Example #1:

The most basic hedge assumes lines have not chagned and you decide you do not like your position, so you simply bet the other side.  You will pay the juice, but there is no longer any risk/reward.

Example #2:

This hedge assumes that lines have not changed and you still did not like your position.  However you did not completely hate the side, and wanted to keep some exposure.  By betting half (or any other percentage) of the other side hedges you against part of the potential win/loss but still leaves some room for profits.

Example #3:

The real hedging opportunities come become available when lines change.  For example you get the Packers on one side of a key number, then the line moves to the other side.  You can hedge by betting the other side, which means if the final score ends on the key number the line moved over (which many times it will, since this is how the game was handicapped and it is a key number) you can win both sides of your bet and have a maximum of just the juice to pay.

You could also decide to hedge only half of your bet and still have a profitable middle opportunity.

Example #4:

Sometimes through other books or a change in factors you can get both sides of a bet at either no or positive juice, which is a situation known as arbitrage.  If you can get these types of situations, you have to take them, because you are making risk free money. 

I was able to create a profitable strategy for myself for Monday Night's Detroit/Chicago game, where I previously went long the Detroit Lions at -5.5.  You can see the spreadsheet here or a wrap-up based on results tomorrow.

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