In our Betfair Exchange Basic Trading Guide Part 1 we have analysed the complex world of trading and also looked at two popular strategies. We will now look at how we can hedge our bets to guarantee a profit.
Hedging is a strategy that has been used worldwide for a very long time amongst professional punters. It might take some time to get used to.
What is Hedging?
To hedge a betting, you have to place bets on different outcomes in an event in addition to your original wager. The aim of doing so is to try putting yourself in a position where you can get a profit regardless of the outcome. The concept of hedging is different from arbitrage betting, where you take advantage of the different odds that are published by different bookmakers. In hedging, you are using a chance in the circumstances to try securing the maximum possible return.
Hedging can be done on almost every single sport, even though when you have events that have a large number of participants, it might become a bit trickier to master. Tennis or football are perfect as the outcomes are reduced.
How to Hedge Bets
Let’s do an example, so it is easier to understand. For instance, you decide to back player A to win the tournament, before the event starts, at odds of 18.0. Your return will be a nice £180 if you get it right.
You do well, and the player you have backed has reached the final, but there is always the possibility that the favourite, who has odds of 2.14, will win the tournament. You now have, however, the opportunity to secure yourself a profit regardless of the outcome of the final. But how you can do that?
The first thing you would need to figure out is how much you need to lay to lock the profit in. Betfair exchange has a standard 0.5% commission on winnings, and the formula to use is:
Initial bet return / Price of the opposite outcome
So in this case:
£180/2.14 = £84.11
So you have to lay £84.11 on player A (so you betting that he won’t win) to secure yourself a profit regardless of the outcome. So everything is pretty simple on tennis as you just need to follow the formula and lay the player you have originally backed. Let’s take a look at how we can hedge on football.
Hedging on Football Matches
Let’s say that we have an FA Cup match between Premier League top gun Manchester City and mid-table National League side, Barnet. You think Manchester City will rest several players and therefore you fancy a big upset. You decide to back Barnet with £20 at odds of 41 on the Betfair Exchange.
Imagine that Barnet scores twice in the opening 20 minutes. As a result, the price drops significantly and you find a price of 7.1 to lay Barnet. Using a hedging calculator, you figure out that you need to lay £115.49 on Barnet to secure a profit of £95.01. You do that, and you can watch the rest of the match, knowing that you will have a secure profit when it is over regardless of the result.
As you can see, hedging is one of the best ways to secure profit coming from a game but you need lots of practice to maximise the potentials. When you have mastered it, you can really turn lots of situations in your favour.
The best way is to start with small stakes to get used to how the markets are moving and test your strategy. It is important to start slow as this is still betting, and there is always an element of risk attached. Hopefully, this article will help you to improve your trading skills further but, always remember, never bet more than you can afford and keep things fun. Have fun trading!