A hedge doesn’t have to be a labyrinth! Deciding when to hedge a futures bet ultimately comes down your comfort level and the search for value. Plus…NIT Final Four previews and a Markelle Fultz sighting right now in VSiN City.
Sports Betting: Deciding when and how to hedge a futures bet
There’s been a lot of talk the past few days about the huge payoff awaiting Las Vegas casino magnate Derek Stevens if the Michigan Wolverines win the college basketball National Championship. As part of the VSiN family, you’ve probably heard that Stevens placed a bet on March 3 (the day Michigan beat Michigan State in the semifinals of the Big Ten tournament) at 40/1 for the Wolverines to win the title.
He put up $25,000. If Michigan wins, he earns a cool $1 million.
With a payoff that big, it would be tempting for many bettors to hedge against the initial investment to lock in a profit. Sure, that takes the possibility of winning $1 million off the table. But, done properly, it also eliminates the losing downside. Would you rather shoot the moon for the whole thing? Or, lock in a few hundred thousand either way? What about continuing to support Michigan, but trimming off the high end to lock in grocery money?
Complicating things in this particular example…
*There are still TWO games to play rather than just one
*You can actually hedge with Loyola plus the points Saturday to try for a middle
Gill Alexander talked about this today on “A Numbers Game.” Here’s a link to that section of the broadcast by way of twitter. I have to admit that my first thought was in line with Gill’s. Focus on the hedge/middle potential this Saturday. Worry about a championship meeting against either Villanova or Kansas once Saturday is in the books.
Imagine you have that Stevens ticket, and you want to protect yourself against a loss while creating the potential for an even bigger profit. You could bet $105,000 to win $100,000 at the South Point (taking advantage of that great -105 vigorish offer) on Loyola plus 5 points.
*If Loyola wins outright, your $25K futures ticket is toast, but you net $75K because Loyola plus 5 cashed.
*If Loyola loses by 1-4 points, your futures ticket is still alive to win $1 million, but you also win that $100K on the Ramblers. If you don’t do anything in the Finals, you’re either going to win $75K (Michigan loses to Villanova or Kansas), or now win $1.1 million. You’ve erased any potential loss and increased your profit potential.
*If Loyola loses by exactly 5 points, that smaller bet is a push…and you’re still alive on the futures ticket.
*If Michigan wins by 6 points or more, you’ve lost the Loyola bet and will curse yourself through sleepless hours for not trusting your Wolverines…and now you have to get cute in the finals with a moneyline bet on the opponent to lock in some sort of profit.
A very important hidden issue here involves “comfort level.” Gill talked about it. And it’s really the central point for doing what’s best for YOU if YOU are in this kind of situation. Are we talking about “life changing” money? Most of us would be happy locking in a big payday at the expense of winning the lottery (particularly if Michigan runs into red-hot Villanova as an underdog).
You just read through some of the possibilities when risking $25K to win $1 million. Let me ask it this way. What if, just betting with a friend of yours, you bet $2.50 to win $100. Two dollars and fifty cents…pocket change. Not even a cup of coffee at your favorite shop. Would you sweat hedging then? Would you be thinking, “I really want to lock in fifty bucks here.” Or, “Man, losing $2.50 is really going to tick me off if Michigan falls apart.”
Probably not. No harm if you lose…and it would be fun to win $100 bucks on your favorite team if they cut down the nets.
Same ratio. And honestly, probably a similar relationship to the real-world comfort level for a multi-millionaire real estate and casino mogul.
I corresponded with a great source for sharp betting information, @InsideThePylons (twitter), for additional guidance on the use of hedging. Here are his thoughts.
ITP: Hedging should only be done if the bet you are making to hedge is in your opinion neutral or EV. If you were going to win $1M with heads on a coin flip, would it be smart to give 110 on tails to hedge your position? Of course not. If the money is life-changing, then you could understand/argue that hedging is OK...but that still doesn't make it right or smart. That is not the case here.
VSiN City: Let’s say a bettor believed that Loyola plus 5 in Saturday’s game WAS a plus-EV bet…meaning he had a grading of Michigan by less than five and was betting for value. Should that bettor increase his normal bet size because of that prior futures position?
ITP: If I thought Loyola 5 is EV because I made them 4, I would definitely bet more than my regular bet given the situation...though I would prefer to bet them on ML instead if I could find the right number. I wouldn't be overly concerned with hitting the middle here. I know the lure of winning both is appealing, but I think the true hedge of the bet would be a plus-EV money line...getting around plus 220 (or the best price available) and winning about $220K for $110K would be best scenario.
At the top, we said a hedge didn’t have to be a labyrinth. Given all the directions we’ve discussed it may still seem like a maze. Here are the most simple strategies recommended by sharps regarding futures betting and hedging.
*Don’t bet futures. You’ll almost always gain a better return simply betting your preferred team on the money line and re-investing your money with each successive victory. (This also increases your flexibility, and you can stop if needed if you believe the market has caught up to your team).
*If you DO bet a futures option, do it because you’re convinced it’s a plus-EV bet (you’re getting the best of the odds), not because you plan to hedge against it later. If you’re just betting your favorite team without thinking about the odds, with plans to hedge against that bet later, @InsideThePylons says “You are technically paying double or even triple juice on your total investment.”
*Only if you find yourself in the unique position of locking in life-changing money in the context of YOUR personal finances, should you consider betting without line value in your favor. Let’s say you entered a free contest (no chance for a loss), with a big payoff…and now you’re one game away from cashing the grand prize. Then it might make sense to hedge with a bet on the opposing team to guarantee cash coming your way.
Best of luck to Derek Stevens however he chooses to play his position this weekend, and to all of you who still have live futures tickets on any of the Final Four.
NIT: “Holy Trinity” previews for Tuesday’s Final Four in New York
During this lull before the Final Four of the NCAA Tournament this weekend, the NIT moves front and center with its semifinals and finals from Madison Square Garden in New York. Here are quick previews from the Holy Trinity perspective (defensive efficiency, rebound rate, and turnover avoidance) in the format we’ve been using for guidance all month.
Let’s run them in the order they’ll be played. You can watch both semifinals on ESPN.
Western Kentucky (-1.5/140) vs. Utah (7 p.m. ET on ESPN)
Utah #57 defense, #220 rebounding, #122 TO avoidance
W. K.: #82 defense, #89 rebounding, #64 TO avoidance
When we briefly touched on the NIT yesterday, this game was pick-em. The public wouldn’t bet a matchup like this early, and wouldn’t bet on a relatively obscure TV team like Western Kentucky even if they did. So, we know that’s sharp money on the Hilltoppers at pick-em and -1. You can see that Western Kentucky largely gets the best of it across the Trinity. Slight disadvantage on defense, but much bigger edges on the boards and at protecting the ball. That’s quality balance for a team that had to beat #1 seed USC and #2 seed Oklahoma State on the ROAD to get this far. Utah did upset St. Mary’s last week, but had two home games prior to that at friendly altitude. Can see why informed money stepped in at pick-em.
Penn State (plus 1.5/153) vs. Mississippi State (9:30 p.m. ET on ESPN)
Mississippi State: #31 defense, #96 rebounding, #232 TO avoidance
Penn State: #19 defense, #72 rebounding, #116 TO avoidance
Penn State’s slightly better at everything, which is often important because the lesser team doesn’t have any workable options beyond hoping its three-pointers go in. We’ve talked a few times about how well Penn State closed the season. Nice run in the Big 10 tournament, and then road wins over #1 seed Notre Dame and #2 seed Marquette to earn a trip to New York. Though, with a spread of just plus 1.5 at Marquette, the market was telling us Penn State was the better “neutral court” team in that one. Considering how well the Nittany Lions performed ON THIS COURT IN its conference tournament, is this really a “neutral” court in this matchup?
Mississippi State also knocked out the top two seeds in its section to advance, beating #1 Baylor and #2 Louisville. No way to call this team a pretender. Stellar defense from both.
We’ll run box score stats from both games for you tomorrow.
NBA: Markelle Fultz returns, and Philadelphia is looking formidable
Great to see Markelle Fultz in uniform and on the floor for the Philadelphia 76ers Monday Night. You probably know about his injury issues, and concerns about the yips on his jump shot. The rest of the Eastern Conference may not be so enthused. Philadelphia won its seventh straight game in a blowout of Denver, with a fresh Fultz having an impact all over the floor.
Philadelphia (-4.5) 123, Denver 104
Two-point Pct: Denver 47%, Philadelphia 53%
Three Pointers: Denver 11/32, Philadelphia 13/29
Free Throws: Denver 21/34, Philadelphia 18/25
Rebounds: Denver 37, Philadelphia 54
Turnovers: Denver 14, Philadelphia 17
Pace Factor: 104 possessions
High energy game, with Philadelphia creating open looks for itself while winning the rebounding battle huge. Turnovers were a concern at pace. But, all the other positives did more than cancel that out.
What about Fultz?
*5 of 13 shooting, for 10 points
*4 rebounds (all offensive)
*Plus 16 plus/minus
His jumper is still a work in progress. But, that kind of energy off the bench can only help down the stretch and in the playoffs.
Speaking of that…let’s update the playoff picture from our last look a week ago. We’ll be transitioning to heavy coverage of the NBA (and Major League Baseball) after the college basketball season ends Monday.
1…Toronto is a virtual lock for the #1 seed
2…Boston is a virtual lock for the #2 seed
3…Cleveland has a one-game lead on Philadelphia
4…Philadelphia has a half-game lead on Indiana
5…Indiana is now 2.5 clear of Washington
6…Washington is a game ahead of Milwaukee
7…Milwaukee is a half-game ahead of Miami
8…Miami is safely in the playoff, five games clear of #9 seed Detroit
Very interesting handicapping dynamic for the 3-4-5 spots right now. Obviously, it’s better to be in the 3-4 part of that because you have home court advantage in the first round. And, it looks like 3 is much better than 4-5 because you’ll draw Boston (possibly without Kyrie Irving) in the second round rather than Toronto. So, peak motivation for Cleveland (who’s won 5 in a row), Philadelphia (who’s won 7 in a row), and Indiana.
Just below that, earning #7 should be much better than #8 because you avoid current powerhouse Toronto and draw possibly short-handed Boston. Will Washington (who’s lost 3 in a row) try to drop down to #7 to get Boston? Nobody wants to be #8, that’s for sure.
1…Houston is a virtual lock for the #1 seed
2…Golden State will be #2, and won’t have Steph Curry in the first round
3…Portland has a two-game lead over Oklahoma City
4…Oklahoma City is a half-game ahead of New Orleans and San Antonio
5-6: New Orleans and San Antonio
7: Utah is a game behind NO and SA, but only a half-game ahead of Minnesota
8…Minnesota doesn’t want to finish #8 and play Houston. Will it, GULP, try to miss the playoffs? Horrible fourth quarter vs. Memphis Monday night has to at least raise that inkling.
Denver is 1.5 games out of the final playoff spot, the LA Clippers 2.5 out. Will be interesting to see if there’s a battle to reach the playoffs down at the bottom…or a lack of fire about drawing a likely drubbing by Houston. Expect peak intensity from the 4-5-6 slots because home court is so important in a competitive first round matchup.
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