Stuckey: How to Hedge Longshot Futures and My Plan for Auburn
Marvin Gentry-USA TODAY Sports. Pictured: Auburn head coach Bruce Pearl
- Stuckey offers advice on how to hedge long shot futures, since many bettors want to lock in a profit as soon as possible.
- Hedging can be a dangerous game, especially if your team is an underdog, and the hedging costs can add up quickly.
- Stuckey also details plans for his Auburn national title futures that are two wins from cashing.
“Hey Stuck, how should I hedge my future?”
The question I get more than any other from recreational bettors on social media and in real life.
There’s nothing wrong with the question, but it’s almost impossible for me to answer in broad terms. It’s similar to asking a financial advisor how to invest your money without sharing any other details.
Hedging a future depends on so many factors, starting with this one — is it even possible?
I see too many people wanting to hedge way too early. It’s best to show an example to illustrate my point here.
Is Hedging Mathematically Possible?
Let’s say you had a 50-1 future on Auburn and wanted to hedge some of the risk before the Tigers’ Sweet 16 matchup against North Carolina. We will assume you bet $100 on this future to make the numbers easy, so you have a $100 to win $5,000 ticket.
We’ll also assume Auburn would be about a five-point underdog for the rest of its four potential games. That would make every opponent roughly -200 on the moneyline (a fair assumption).
A 50-1 future in the Sweet 16 sounds nice, and many think they can profit off of it. But let’s look at the math, assuming you wanted to guarantee a profit of $100 no matter what happens.
Sweet 16: Bet $400 to win $200 on UNC moneyline
If UNC would have won, you would have accomplished your goal of profiting $100 (accounting for your original $100 futures wager). However, Auburn advanced once again.
As a result, you need to bet the following on Kentucky to simply profit $100:
Elite 8: Bet $1,200 to win $600 on Kentucky moneyline
Again, if Kentucky would have won, you would have walked away with a net $100, but Auburn found a way in overtime. You have now lost a total of $1,600 in hedge attempts. If you still wanted to chase that $100 profit, you’d have to make the following bet in the Final 4:
Final 4: Bet $3,600 to win $1,800 on Virginia moneyline
If Virginia wins, you walk away with your $100. However, if Auburn pulls off another upset, you are stuck. You have now lost $5,200 in incorrect hedge attempts (and actually more since UVA ML is higher than -200).
Your best case scenario is to now hope Auburn wins the national championship so you can only lose -$200 ($5,200-$5,000). And if Auburn loses the national championship, you lose $5,300 by simply trying to profit $100 with four games to go on a $100, 50-1 future.
The hedging adds up quickly, so you have to be careful and plan ahead carefully. Before you even think about hedging a future, you need to project the hardest possible path for a team to get the implied moneyline odds. If you don’t set your own numbers, you can use ours or triangulate them yourself (look at past lines of similar opponents in recent games to get a ballpark, although this can be a less accurate approach).
If you don’t want to go through all of that work, I have three basic guidelines to follow (that can vary based on the specific circumstance but are good rules of thumb).
Hedging Futures Guidelines
- Never hedge a future with 30-1 or less odds until the championship
- Don’t hedge a future between odds of 30-1 and 50-1 until the Final Four
- Wait until the Elite 8 to think about hedging a future between 50-1 and 100-1
If you do determine that it is actually possible to hedge at a specific point in time, the decision then comes down to your objective and personal risk aversion level.
There are all kinds of variables that determine your risk aversion level. You may be completely risk-loving (let it ride) or extremely risk-averse (perfectly content locking in the most profit no matter what) — but more than likely, you will fall somewhere in between.
Will it ruin your month if you get nothing out of the future, potentially sending you on tilt? If so, you should probably hedge. If it won’t and your original intent was to throw a dart at a long shot, in most cases, you should let it ride.
Ask yourself what your original goal of the future was: to take a shot or to get to a certain point and lock in profit? That should help influence your hedging decision.
The potential matchups matter, your gut can play a role, and many other factors that will depend on each unique future and bettor play a part.
My Auburn Futures
As many of you might already know, I have three bets on Auburn to win the national title that I bet at different times throughout the season in our quest to repeat as futures national champs after hitting Villanova 30-1 last year.
I bet each for a half unit, which we will assume is $100 for ease of explaining my plan of attack.