Hedging a bet: how the second stake works & what it costs

A sourced explainer on placing a bet on the other side to lock in a result, how the stake is sized & what the bookmaker’s margin takes on the way.

What hedging a bet means

Hedging a bet means placing a second bet on the other side of a first one, usually after the first has moved in your favour, to lock in a profit.

The classic case is a futures bet, which Covers describes as a wager on a longer-term outcome, such as which team will win a championship, usually settled at the end of a season or tournament. Covers notes that the odds a futures bet is placed at are locked in for the bettor, whatever happens to the market price afterwards.

Covers says that if a bettor backed a team at larger odds & that team “played its way up the futures board into one of the favorites”, the bettor “may have an opportunity to lock in a profit by betting on the other side.”

Betting exchanges use their own vocabulary for the same idea. Betfair’s trading guide describes a ‘lay’ bet as backing the opposite result, & a ‘green book’ as “A bet where every outcome guarantees you a profit”, so called because potential profit on the exchange is shown in green.

Hedging a futures bet: a worked example

Covers uses the Kansas City Chiefs as its example. It says the Chiefs “had +1,200 odds to win the 2020 Super Bowl” after losing four of six games between Week 5 & Week 10, so a $100 bet was “in line to win $1,200”.

In American odds, a plus figure shows the profit on a $100 stake, which is how Covers reads its own examples, such as “+650 (win $650 on a $100 bet)”.

When Kansas City reached the Super Bowl, Covers says the bettor could have put $100 on the San Francisco 49ers “at +110 to win $110”. If San Francisco won, that would return the original $100 plus a $10 profit. If Kansas City won, the bettor would keep the $1,200 Chiefs win minus the $100 hedge stake.

Covers’ second option is a bigger hedge: $600 on the 49ers at +110, which “would pay $660”. On Covers’ figures, the bettor wins $600 if the Chiefs win ($1,200 minus the $600 hedge) & $560 if the 49ers win ($660 minus the $100 Chiefs stake).

The stake that leaves the same result either way

The two Covers hedges show the trade-off. The small hedge keeps most of the upside but leaves very little if the hedge wins. The larger one brings the two outcomes much closer together.

The arithmetic for making every outcome return the same amount appears in Wikipedia’s article on the mathematics of bookmaking. In its football example, “A stake of £60.00 @ 4–6 returns £100.00 (exactly) for a home win”, while £40 at 6-4 & £20 at 4-1 also each return £100.

Wikipedia explains that decimal odds give the total payout per unit staked, including the stake. So the stake that produces a chosen return on one outcome is that return divided by the decimal odds on it.

For a hedge, the chosen return is what the first bet would pay back if it won. Sizing the second stake to match that return is the idea behind a balanced hedge. A bookmaker making a book applies the same idea from the other side, which is how the £120 taken in Wikipedia’s example pays out only £100 whatever the result.

Hedging the last leg of a parlay

A parlay combines several selections into one bet that only pays if every selection wins. Once all but one leg has won, the parlay’s potential return becomes the figure a hedge on the final leg would be sized against, using the same arithmetic as a single bet.

Action Network reported one real case. It says “The $100 wager at +1714500 odds was placed with DraftKings in May of 2023” by Wayne Shelton, on the Texas Rangers to win the 2023 World Series, the Kansas City Chiefs to win the Super Bowl & the Oklahoma City Thunder to win the NBA title.

With the first two legs won, the $1.7 million payout was contingent on the Thunder. Action Network says Shelton “hedged slightly along the way” & that the values of those hedges are unknown.

According to Action Network, he “could have netted far more by hedging more aggressively through each round”, but “liquidity would have been an issue” & “sportsbook limits likely would have complicated the substantial wagers” a full hedge would have required.

What hedging costs

Bookmakers build a margin into their prices. Wikipedia explains that a bookmaker pays out at odds lower than the “fair” value, & that the amount by which a book’s percentages exceed 100% is called the overround. In its football example the book totals 120%.

A hedge is a second bet at prices that carry that margin, so the bettor pays it again on the second stake. The Wizard of Odds’ Ten Commandments of Gambling put the seventh as “Thou shalt not hedge thy bets”, explaining that “Hedge bets usually carry a high house edge.”

Futures are a costly starting point. Covers says “There’s a huge house advantage for sportsbooks with futures odds, as only one result is graded as the winner.”

The Wizard of Odds’ futures appendix gives a method: convert each price to a probability (“if the odds pay x to y then the probability of winning is y/(x+y)”), add them to a total t, & “The overall house edge on all futures bets is 1-(1/t).” Its survey, “conducted in August/September 2014”, found house edges on Las Vegas Super Bowl futures ranging from 21.90% at CG Technology to 57.93% at TI.

Parlays add another layer. Wikipedia notes that when selections are combined, the overround of each is compounded, & in its tennis example the overround “has slightly more than doubled by combining two single bets into a double.”

When a hedge can make sense

The Wizard of Odds’ commandment carries an exception: “Exceptions can be made for insuring life changing amounts of money.”

In Ask the Wizard #201, a reader described an uncle who held a 60-to-1 ticket on New England to win the Super Bowl, worth a potential $6,000, & swapped it for a guaranteed $3,000 just before the game.

The Wizard said he would not begrudge the choice if $3,000 were life-changing to the uncle & the win chance were not much more than 50%. For the years he thought most likely, he estimated New England’s chance at about 71%, writing that “A fair surrender value would have been 0.71 × $6100 (including his original bet back) = $4,331.”

He put the house edge on the $3,000 offer at 42% & said the uncle “could have gotten much better odds on the open market by betting the other team on the money line”.

Hedging vs cash out

A cash-out button does the hedging sum for the bettor. Betfair’s trading guide says its exchange cash-out feature “places the appropriate opposing bet for you when you wish to exit the trade”, calculating the stake needed for a green book.

In Betfair’s example, a bettor lays a horse at 2.0 for £10, the price drifts to 4.0, & cash out backs the horse at 4.0 for £5 “to guarantee a profit of £5 regardless of the outcome.” Betfair also describes an auto cash-out feature that locks in a profit at a level the user sets.

Covers notes that some sportsbooks offer an early cash-out option on pending futures bets, letting the bettor close the bet before it is graded.

A cash-out offer is the operator’s price, & it can move sharply. Action Network says the Thunder parlay’s cash-out value was $57,000 before Game 4 of the Western Conference Semifinals against the Mavericks, & that Shelton said it dropped “as low as $10,000 during Game 4”. After the Thunder’s comeback win in Game 4, Action Network reported on 14 May 2024 that he had “cashed out for over $80,000”.

PropSwap, which Action Network describes as a service that lets users sell sportsbook tickets, said “the ticket after Game 4 was worth $201,717.”

Practical limits & keeping it affordable

A hedge only locks in a profit if the price has moved the right way first. Betfair’s trading guide describes creating a green book by placing a bet at a good price & trading out “once the price shortens”, & its horse racing example depends on “accurately predicting” the move.

Size can also be a barrier. Action Network says a full hedge on the Thunder parlay would have faced liquidity problems & sportsbook limits on the large wagers needed.

The Wizard of Odds’ fifth commandment, “Thou shalt not over-bet thy bankroll”, applies to any second bet as much as the first: “Stick to your limits and don’t gamble with money you need for necessities.”

Questions

What does hedge mean in betting?

It means placing a bet on the other side of an existing bet to lock in a profit. Covers describes it as betting on the other side once a long-shot futures pick has become one of the favourites.

How much should a hedge stake be to get the same result either way?

The stake is sized so its return matches what the first bet would return, which means dividing that return by the decimal odds on the other side. Wikipedia’s bookmaking example shows stakes of £60 at 4-6, £40 at 6-4 & £20 at 4-1 each returning £100.

Does hedging cost money?

The second bet carries the bookmaker’s margin, so the bettor pays it again. The Wizard of Odds says “Hedge bets usually carry a high house edge”, & a 2014 survey on its site found Las Vegas Super Bowl futures house edges of 21.90% to 57.93%.

Is cash out the same as hedging?

Betfair says its exchange cash-out “places the appropriate opposing bet for you”, working out the stake itself. The Thunder parlay case shows cash-out offers can swing, from $57,000 to as low as $10,000 within one game, according to Action Network.

Sources

• covers.com
• wizardofodds.com
• wizardofodds.com
• wizardofodds.com
• apps.betfair.com
• betting.betfair.com
• actionnetwork.com
• en.wikipedia.org

Sources checked 29 October 2026. Information only. 18+.