Hedging refers to the act of providing a safety net for your investments, whether that’s in the form of a wager, a purchase of securities, or trading forex. In other words, in any situation where things could go either in your favor or against it over a specific period of time, a hedge is considered a risk-reduction initiative.

In the world of sports betting, a hedge bet is usually a second bet that either reduces the risk of loss or guarantees some sort of win. This is something that the bettor does, not the bookmaker with whom the bet is placed. The bookmaker may offer other types of deal-sweeteners, such as bookmaker welcome offers, cash out options, accumulator bonuses, and so on in order to attract new users. Hedging, however, is entirely on the person placing the bet.

To be clear, hedge betting is very different from something known as arbitrage betting, although they do share some similarities and both are legal ways to secure your investments. However, arbitrage betting or arbing, as it is sometimes known, involves placing bets with two or more bookmakers to take advantage of the differences in odds they offer. This practice is usually frowned upon by most sportsbooks because it guarantees a win, as long as it’s done right and perfectly timed.

Hedge betting is different because you’re not playing bookmakers against each other. Instead, you’re playing two or more bets against each other. The outcome for you could still be a win-win situation, depending on how well you execute your hedging strategy

How to Hedge a Bet

There are several ways to hedge a bet, but it usually involves placing a larger bet on the opposite outcome to that of the original bet. To help explain how it works, we’ll show you a very straightforward example.

An Example of a Hedge Bet

Let’s say that Team A and Team B will be facing each other in the finals. Team A’s odds are 60/1 and Team B’s odds are 2/1. If you’ve bet X dollars on Team A to win, you’ll get 60X as winnings – if they win. That’s what the odds translate to. On the other hand, if they lose, you lose your entire wager of X dollars.

Let’s say the hedge bet is 10X dollars on Team B to win. That means you’re betting ten times the amount to back Team B as you did on Team A. If Team B wins, you get 20X because of the 2/1 odds.

You have now hedged your Team A bet with your Team B bet, or vice versa depending on how you look at the set-up. If the Team B bet is your main bet, then the Team A bet is your hedge. The relationship doesn’t matter but the amount you wager on each one – based on the odds for each team – does matter a great deal.

In this scenario, there are two possible outcomes of this set-up and how it affects your winnings:

Team A Wins – You get 60X from the first bet but lose 10X on the hedge – Your winnings are 50X

Team B Wins – You lose X from the first bet but win 20X from the hedge – Your winnings are 20X less your original wagers of X and 10X, which leaves you with 9X

As you can see, you win in both cases. Assuming the main bet was on Team A and the hedge on Team B, in the first scenario, you sacrifice some of your win toward the hedge; in the second, you save yourself a loss on the main bet and actually come out winning because of the hedge bet.

Hedging strategies can get really complex when there are multiple teams and bets involved. However, you can use hedge betting calculators and other software to tell you how much to bet and how to hedge that bet for the best possible outcome.

That said, it’s a good idea to read up on the best hedging strategies to know when to hedge a back bet or a lay bet depending on whether the odds are shortening or drifting (lengthening.)

Hedging is purely a math puzzle but, if you can crack it, you can effectively bet on sports, trade the stock market, dabble in forex, and engage in several other areas where a great degree of risk is involved.