Hedging bets: how to hedge a bet and lock in a profit

Key facts

To fully hedge a two-outcome bet, back the other side for: your potential return / the other side's odds. You then finish with the same profit either way.
A $20 futures bet at $15.00 that reaches the grand final can lock in $113.33 whatever happens by backing the opponent at $1.80 for $166.67, in our calculation.
On an exchange the hedge is a lay: lay stake = potential return / (lay odds - commission). That suits racing, where backing every rival is not practical.
Hedging is never free. In our grand final example the hedge gives up about $5.13 of the ticket's fair value, because the hedge bet carries the bookmaker's margin.
Online in-play betting on sport is prohibited in Australia, so a hedge during a match has to be placed by phone or in person. A hedge on a later game that has not started is a normal pre-game bet.

What hedging a bet means

Hedging a bet means placing a second bet against your first one, so that you lock in a result whatever happens. It is most useful when a bet placed at a long price has come good part of the way: a futures bet on a team that has reached the grand final, or a multi with one leg to go. It works with almost any of the bet types on an Australian betting slip, as long as you can bet on the opposite outcome. You trade some of the possible upside for certainty.

A hedge can be full, where every outcome pays the same, or partial, where you only cover part of the risk.

The hedge stake formula

For a market with two outcomes, a full hedge backs the other outcome for:

Hedge stake = potential return of your bet / odds of the other outcome

Your locked-in profit is then the potential return, minus your original stake, minus the hedge stake. On an exchange you can lay your own selection instead:

Lay stake = potential return / (lay odds - commission)

with the commission written as a decimal (6% = 0.06). The lay version is the cleaner hedge when the market has many outcomes, such as a horse race.

Worked example 1: a futures bet reaching the grand final

Before the season you put $20 on a team to win the premiership at $15.00. It makes the grand final, where it is $2.10 and the opponent is $1.80. If your team wins you collect $300.

Choice	Hedge bet	If your team wins	If the opponent wins
No hedge	None	+$280.00	-$20.00
Full hedge	$166.67 on the opponent at $1.80	+$113.33	+$113.33
Break even hedge	$25.00 on the opponent	+$255.00	$0.00
Half hedge	$83.33 on the opponent	+$196.67	+$46.67

These are our calculations, with the profit counted from your original $20. The break even hedge only covers your stake: stake / (hedge odds - 1) = $20 / 0.80 = $25. Any hedge between $25 and $166.67 is a trade-off between the two columns.

What the hedge costs

The grand final prices of $2.10 and $1.80 add up to 103.17%, so they carry a 3.17% margin. Stripping it out gives your team a 46.15% fair chance, which makes your $300 ticket worth about $138.46 on average.

The full hedge locks in a return of $300 - $166.67 = $133.33. In our calculation the hedge bet's expected value is about -$5.13, which is exactly the gap between $138.46 and $133.33. That is the price of certainty: you pay the bookmaker's margin a second time, on a much bigger stake than your original bet. Whether it is worth it depends on how much a $280 swing matters to you, not on the maths.

Worked example 2: the last leg of a multi

You have a $10 four leg multi at combined odds of $12.00. Three legs have won and the last game, which has not started, has your team at $1.50 and the opponent at $2.70. A win returns $120.

Back the opponent: $120 / $2.70 = $44.44. Either way you finish $65.56 ahead.

Lay your team on an exchange at $1.54 with 6% commission: lay stake = $120 / (1.54 - 0.06) = $81.08, with a liability of $43.78.

Result	Multi	Lay of your team	Net
Your team wins	+$110.00	-$43.78	+$66.22
Your team loses	-$10.00	+$76.22 ($81.08 less 6%)	+$66.22

Here the lay locks in $66.22 against $65.56 for the bookmaker hedge, because laying at $1.54 with 6% commission works out cheaper than backing at $2.70 in a market that adds up to 103.7%. The answer flips if the lay price is wider or the commission higher, so check both. The multi bet calculator gives you the potential return to start from.

Worked example 3: a race futures bet

You took $10 at $41.00 on a horse for a big race months ago, so a win returns $410. On race day it is $6.20 on the exchange, and there are fifteen rivals: backing every one is not practical. A lay hedge covers them all at once.

At 8% commission on Australian racing, lay stake = $410 / (6.20 - 0.08) = $66.99, and the liability is $348.37. If your horse wins you net $410 - $10 - $348.37 = $51.63. If it loses you collect $66.99 less 8%, or $61.63, which is also $51.63 after your original $10. In our calculation that hedge costs about $4.50 in expected value, almost all of it commission. Our lay betting guide covers liability and commission in detail, and futures betting explains how those long-range markets work.

When a hedge makes sense

The swing would hurt. If losing the whole return would matter to you, locking some of it in is a fair choice.
Partial, not all. A partial hedge that covers your stake keeps most of the upside for a small cost.
Not as a habit. Hedging every bet that gets close pays the margin over and over.
Not to rescue a loser. Hedging a bet that has gone against you just adds a second losing bet to the first.

Pundit tip: work out the full hedge before you look at a cash out button. If the hedge locks in more than the cash out offer, the bookmaker is charging you extra for the convenience.

The hedge bet calculator works out full and partial hedge stakes for any price, and our guide to cash out betting shows how to compare a cash out offer with the hedge.

Hedging and the in-play rules

The best time to hedge is often during the game, and that is exactly where Australian law draws a line. Online in-play betting on sport is prohibited under the Interactive Gambling Act. ACMA says the phone exception only applies when the bet details and confirmation are given wholly through the phone call, and bets placed in person at a licensed venue are treated separately again. Betfair's FAQ says in-play sports bets on its exchange go through its telephone operators, while horse racing in-play is available online. The details are in our guide to in play betting in Australia.

The multi example above is fine online because the last game has not started: a bet on a match before it begins is an ordinary pre-game bet, even if your multi's other legs are already settled.

Frequently asked questions

How do you hedge a bet?

Work out what your original bet returns if it wins, then bet on the opposite outcome so that it returns the same amount. For a two-outcome market the hedge stake is your potential return divided by the other side's odds. Your profit is then the same whichever side wins.

Is hedging a bet a good idea?

It reduces risk, not cost. Every hedge is a new bet that carries the bookmaker's margin, so on average you give up a little of the ticket's value. It makes sense when a big swing would genuinely matter to you, not as a habit.

What is the difference between hedging and cashing out?

Cash out is a price the bookmaker offers to settle your bet early. A hedge is a separate bet you place yourself. Working out the hedge first tells you whether a cash out offer is fair: if hedging locks in more, the cash out is the worse deal.

Can you hedge a multi bet?

Yes. When only one leg is left, bet against that leg so both outcomes pay the same. A $10 multi at $12.00 with a $1.50 last leg can lock in $65.56 by backing the other team at $2.70 for $44.44, in our calculation.

Can I hedge during the game in Australia?

Not online on sport. Online in-play sports betting is prohibited under the Interactive Gambling Act; the exceptions are bets made wholly by phone and bets placed in person at a licensed venue. Horse racing in-play is available online on Betfair.