This time of year I often get questions from people about if/how to hedge their future tickets. We have a nice situation with the Super Bowl with Ravens +3000, Ravens +850, Niners +1000 (not in NY so not tracked but the rest of the states had it), and Chiefs +650. So we want the Ravens, Niners, and Chiefs in that order if you have all of the bets and then the Lions winning it all would mean we lose them all. So what should you consider when you look to hedge or not hedge these futures (keep in mind, this is really just an example to help you look through hedging)?
First let's establish what our profits and loss would be if each team wins (just doing the tracking numbers here your bets can and will differ):
Now let's use the current probabilities (will use Circa’s yes/no prices) to find the EV of our portfolio:
Total EV of our positions: +$427.52. So assuming we are not risk averse or risk seeking here, we accept anything higher than $427.52 to cash out of our super bowl futures and say no to anything less than that. That being said, there is a bit of wide range of outcomes and we may (or may not) want to even our exposures. Let’s look at various hedging options and what they do to the EV of our portfolio.
1. Hedge everything at best prices to even us out
All we need to do here is find the best price for each book and put enough to relatively balance out the scales here (I am going to round these off so as to not make it weird). Lions $85 at Fanduel to win 722. 49ers $105 (Betrivers) to win $157 (BetRivers). Chiefs $80 to win $360 at FanDuel. So now let's look at our winnings in each scenario and compare it to the EV of our portfolio:
So as you can see despite using the best lines available (found on BetRivers and FanDuel as shown above) we still are paying some vig as every scenario ends with us making less than the total EV of our positions beforehand of $427.52. The new EV of our portfolio when multiplying each of the payouts by their probability of winning it all gets us to $418.7. In other words, we have spent about $9 to ensure we get paid at least $412. It is not the “recommended” option, but the pros and cons of a complete hedge are fairly obvious from the above. Lets go to option 2
2. Hedge, but stick to promos/ free bets etc.
The only promo out right now is on ESPN - it says bet $20 and get a $5 free bet. We also have two $5 free bets on fanduel. Let's say we put them all on the Lions (ESPN +750, FanDuel +850). How do our payouts look now (I am counting the opportunity cost of $10 of free bets as -$8):
It is not perfectly balanced but we get to have some clear rooting interest while still making money no matter what. Using our probabilities from before to figure out the EV of our portfolio here:
Multiplying these by the original probabilities we get the EV to be +$427.9 - so about the same since that FanDuel +850 price beats 80% FBC. I personally prefer it this way. For those without ESPN promo you can still put some free bets on the Lions/ use other promos coming up to hedge. This iteration is my preferred one.
3. Wait and see approach
There's not necessarily a need to do anything now. We lose a lot of equity if Chiefs and Lions win but it is an unlikely scenario and we can see if one or more of the favorites win and then hedge before the super bowl (if you are so inclined).
Caesars Sportsbook: If your first cash bet loses, you’ll get it back as a Bonus Bet – up to $1,000
Bet365:
BetRivers:
BetSafe:
Fanduel: Bet $5 Get $150 in Bonus Bets!
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