Hedge Bets Are Almost Always a Bad Strategy

Gamblers are forever trying to find ways to "lock in" a win -- to guarantee themselves a profit even though it means taking a short payoff. They do this by making what's known as a "hedge" bet. What exactly is that? Let me give you an extreme example based on a true story.

In August of 1999, my friend went out to Vegas and picked up a "football futures" card from the Mirage Sports Book. Every pro football team was listed, each with its odds to win the Super Bowl in the upcoming '99 season. Now up until that time, the St. Louis Rams were pretty much a "nothing" team, so their odds were 250 to 1 to win the big dance. My friend, being from St Louis, fondly plunked down $20 and tucked the ticket stub in his wallet.

Lo and behold, five months later the Rams were about to meet the Tennessee Titans in the Super Bowl! Besides that, the once longshot Rams were now 7 point favorites to win it all. My friend was practically at the threshold of winning $5000 since, statistically, a 7 point favorite wins the game outright 70% of the time.

But what if the Rams lost? Then my friend blows twenty bucks. So what does he do? He flies out to Vegas for the Super Bowl and bets $1500 on Tennessee to win straight up getting 2 to 1 odds (by betting the money line). What he did was "hedge" his bet. That way, if the Rams get beat, he still wins three grand.

Well, you know what happened. The Rams won the Super Bowl, beating Tennessee 23-16. The downside is that instead of winning $5000, my friend netted only $3500 after paying for his $1500 Tennessee bet.

Gamblers are always trying this kind of thing in the casino and it's almost always a bad move. The most typical example is taking even money on your blackjack when the dealer has an ace up. If you let it ride, you might win 1-1/2 bets or you might push. But if you take even money you'll win one bet every time. The problem is, letting it ride makes more cumulative money as time goes by. Hedging your bet just eats into your profits.

Craps players are no different. Sometimes during a monster roll, they'll look out there and see they have every point number covered. So what will a hedger do? He'll make a bet on "any 7" as insurance against getting wiped out. The thing of it is, betting the 7 is a horrible bet no matter when you make it. You'll still go on to win or lose your place bets just the same -- but you'll also lose 16% of all the money you bet on the 7 over time. It doesn't matter that you'll win the "any 7" bet at the same moment your place bets get wiped off the board -- that's merely incidental. You're still going to end up losing good money on those "any 7's" over time, so why do it?

A roulette player I know used to simultaneously bet $25 on the "1 to 12" combo and another $25 on "13 to 24", then hedge with $2 on zero and $2 on double zero. Doing this, he'd win either $18 or $21 whenever anything but "25 to 36" came up. He'd make money on 68% of the spins but went empty because he was laying roughly 54-20 odds on his money.

The moral to the story is this. Any time you have two bets going that work against each other, one of them almost has to be a bad percentage bet. If your first bet is the likely moneymaker, that second "hedge" bet you're thinking of making almost can't be right.

If you've got that Rams Super Bowl ticket, the only way you should bet Tennessee is if Tennessee is the better bet. When you have blackjack, the only way you should take insurance is if insurance is a good bet all on its own. And when you've got all six place numbers covered on the craps table, ask yourself if "any 7" is a fundamentally good bet before you throw a chip on it. If it is, then obviously you should take all your place bets down.

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