Hedging is placing a bet on the opposing outcome of an existing position to reduce variance or guarantee a profit. It's most common in parlay run-outs, futures bets, and live betting.
Example: You bet a 4-leg parlay at +1000. Three legs have hit and the final game approaches. Hedging the remaining leg at -200 guarantees a profit regardless of the outcome, at the cost of a smaller potential windfall.
When hedging makes sense: - The hedge is cheap relative to your guaranteed payout - Remaining EV is negative (e.g., the live line has moved against you) - Position size is too large relative to bankroll management rules
When hedging destroys value: - You're hedging positive EV positions - Transaction costs (vig on the hedge) exceed the variance reduction benefit
The mathematical breakeven hedge: size the hedge so both outcomes yield identical profit. Then determine whether that locked profit is worth giving up the potential of the original bet.
Key nuance: Most retail bettors over-hedge. If your original bet was +EV and nothing has changed, adding a -EV hedge reduces your expected return. Partial hedges exist on a spectrum — only hedge when the EV trade-off is favorable.