How to Use Hedging Betting Strategy in Betting Exchanges

Exchange betting is very useful for applying a number of betting strategies. Here you can learn the basics about the hedging betting strategy and how to make smarter betting decisions for long-term success.

The Hedging Betting Strategy

Hedging betting strategy is a betting system where bettors take an opposing position to their original bet in order to protect themselves from losses. In exchange betting hedging can be applied by using back and lay bet options.

What is exchange betting and how it works >

How Hedging Betting Strategy Works?

In order to apply hedging betting strategy, bettors need to first calculate their stakes, place an initial bet and then place their hedge bet.

Place an Initial Bet

Bettors need to decide on the event, the market, the odds and the stake and then place an initial bet. For example, in a soccer match the initial bet is to place a back bet on Team A to win with 100€ at odds of 3.00.

If Team A wins, you get back 300€ including your original stake. Your net profit is 200€.

If Team A loses, you lose your 100€ stake.

Place the Hedge Bet

As soon as they place their initial bet, they need to decide when to place the hedge bet. In the case where the initial bet is a back bet, the hedge bet needs to be a lay bet at lower odds compared to the initial bet. Bettors need to make sure the liability from the lay bet is manageable and the potential profit is still positive.

In the soccer match example, in order to hedge, bettors need to place a lay bet on Team A (they bet that they will not win the game) with 100€ at odds of 2.50.

Calculate the Stakes

Bettors need to be very cautious in deciding the stakes when applying the hedging betting strategy. The stakes need to ensure balanced outcomes. Bettors need to determine profit and loss from both back and lay bets.

How to Apply Hedging Betting Strategy in Betting Exchanges

Initial Bet

The bet will be a back bet and it will be placed on Team A to win a soccer match.

The stake will be 100€.

The odds for Team A to win are 3.00.

If Team A wins, you get back 300€ including your original stake. Your net profit is 200€.

If Team A loses, you lose your 100€ stake.

Hedge Bet

In the initial bet the bettor risks to lose 100€ in case Team does not win the match. In order to protect themselves, the bettor decides to apply the hedging betting strategy and place a second bet against Team A winning.

The bet will be a lay bet and it will be placed on Team A to not win the soccer match.

The odds for Team A not to win are 2.50.

If Team A does not win the game – this means that they could either lose or draw – then the bettor gets a profit from the lay bet.

Calculate the Lay Stake

To balance the bets, the bettor needs to calculate how much to lay on Team A. The formula in doing so, is

Lay Stake = Back stake x Back odds / Lay odds – 1

Lay Stake = 100€ x 3.00 / 2.50 – 1 = 300€ / 1.5 = 200€.

So, in order to hedge, the bettor needs to wager 200€ on Team A not win the game at odds of 2.50.

Calculate Possible Outcomes

Bettors need to be able to see what happens in different outcomes of the match.

Team A wins

From the initial back bet,
the bettor gets a net profit of 200€.

From the hedge lay bet,
the bettor loses 200€.

Net Profit = profit form back bet – loss from lay bet
= 200€ – 200€ = 0€.

Team A loses or draws

From the initial back bet,
the bettor loses 100€.

From the hedge lay bet,
the bettor wins 200€.

Net profit = profit from lay bet – loss form back bet
= 200€ – 100€ = 100€.

Why Lay at Lower Odds?

Laying is a very unique feature of betting exchanges that allows the players to act as bookmakers instead of punters. As bookmakers, they offer odds to other bettors, essentially betting against a particular outcome.

When you “lay” an outcome, you are betting that it will NOT happen. If the outcome you have laid against indeed does not happen, you win your bet and you receive the stake of the person who backed that outcome. If, however, the outcome you have laid against does happen, you lose your bet and you must pay out the winnings to the bettor who backed it.
For example, let’s take the scenario of the same tennis match between Player A and Player B where you believe that Player A will NOT win the match, so you want to place a bet against Player A.

In this scenario, you are a “layer” or a “bookmaker”. You are wagering money on taking a contrarian position and bet on outcomes you believe will not occur.

Why Hedge?

By placing an opposing bet to their initial bet, bettors protect themselves from losing their entire stake if their initial bet loses. Hedging betting strategy allows bettors to ensure that no matter what happens, they either break even or make a small profit.

In a Nutshell

Hedging betting strategy helps bettors manage risks by balancing their bets. Even though they might not win a huge amount, they reduce the chance of losing everything. This strategy is useful for securing profits or minimizing losses in unpredictable situations. Exchange betting is ideal for hedging because it allows both back and lay bets. The odds are more competitive and the peer-to-peer model makes this strategy more effective.