Armani

BAD BETTING: PARLAY & HEDGE


It is astonishing that gamblers keep inventing new ways to lose, when the old ways work so well.

I keep hearing sports bettors speak about hedging their parlays after the first game wins. Hedging involves betting the same amount as was bet on the parlay itself, plus vig, on the opposite side of the second game in the parlay.

Let's assume a bettor plays a $100 parlay combining the Knicks at 7:00 PM and the Lakers at 10:30 PM. After the Knicks win, the bettor gets cold feet. He suddenly fears that he has made a stupid bet, and that he will be wiped out when the second game loses. His fear is valid. He has made a stupid bet, and he will be wiped out if the second game loses. To save himself from himself, he makes an even worse bet. He plays $110 to win $100 on the opposite side of the second game.

Our parlay bettor reasons that if the Lakers win the second game, he will win $260 and lose the $110 bet on the opponent, for a net win of $150. If the Lakers lose, however, our bettor will lose $100 on the parlay but win $100 on the Lakers' opponent and come out even. Heads he wins, tails he breaks even.

To understand how creating a no risk bet, in this instance, can be bad, we need to look at what is really happening. Since the parlay can be hedged, we must assume that the two games in the parlay are sufficiently separated in time. If that is so, why bet a bookmaker parlay at all?

Instead of locking yourself in with a parlay, and then needing to save yourself when you get cold feet later, it would make more sense to bet the first game only for the same amount as you would bet on the parlay. If the first game loses, you are in exactly the same position as if you bet the parlay -- you will be down the bet, and have no action on the later game. If the first game wins, however, you will now be able to decide whether you would like to take your original bet plus all the money you won and place it on the second game, or whether you would like to bet some lesser amount on the second game.

What you would not do under any circumstances, however, is call up your bookmaker and say, "Bet the $220 to win $200 on the Lakers, and I think I'll hedge that two unit bet by betting $110 to $100 on the opposite side 0at the exact same line.” If you want to risk only $110 on the second game, you would simply bet $110 on it."

Betting two units and buying back one unit at the same line accomplishes nothing positive. The only possible result of such betting is to cost you more vig to make a single unit bet. Such a betting technique is foolish. That, however, is EXACTLY what you are doing when you bet a parlay with the idea of hedging it later. If you want to risk only one unit on the second game, bet the two games separately, not in a parlay.

Let's take a look at how the various betting situations work out. If I bet a Knicks-Lakers parlay there are four possible results:

1. Knicks lose - Lakers lose.
2. Knicks lose - Lakers win.
3. Knicks win - Lakers lose.
4. Knicks win - Lakers win.

Statistically, in four parlay bets, I will lose the three times that #'s 1.2 or 3 above occur. I can expect to win once in every four parlay bets when #4 above occurs. If I bet $100 on each parlay, here is the breakdown of my expected results:

#1 Lose $100
#2 Lose $100
#3 Lose $100
#4 Win $260

I will lose $300 in every four parlay bets and win $260. My expected loss is $40 on every four parlays.

If, instead, I start out betting $100 to win $91 on the first game, and if it loses I quit, but if it wins I place the whole $191 on the second game, I will have the following results:

#1 Lose $100
#2 Lose $100
#3 Lose a net $100 (win $91 on first game and lose $191 on second game)
#4 Win $265 (Win $91 on first game and win $191 x .91 = $174 on second game. $91 + $174 = $265.)

By betting both games separately in the same way as a parlay, I will lose $300 and win $265 in every four bets, for a net loss of only $35 in every four parlay bets instead of $40. That may not sound like much, but my losses have been cut by 12.5% with the same picks and the same amount of work. I didn’t need to increase my win percentage. All I needed to do was to bet differently. Cutting your losses by 12.5% can amount to a huge difference in money lost or money won at the end of the year.

Now let's see what happens to our parlay and hedge bettor.

#1 Lose $100.
#2 Lose $100
#3 Break even. (Lose $100 on parlay and win $100 on hedge bet.)
#4 Win a net of $150. (Win $260 on parlay and lose $110 on hedge bet.)

The parlay and hedge technique is the worst of all. You will lose $50 in every four bets instead of just $40 if you bet parlays and don’t hedge, or $35 if you bet the games separately as if you were parlaying. You haven't saved yourself with a parlay and hedge technique, but rather, as you might expect when betting opposite sides of the same game, you have simply cost yourself additional vig. Although, looking on the bright side, you will be one of your bookie's favorite customers, and maybe get a free dinner on customer appreciation day.

Finally, let's see what would happen if, instead of parlaying and hedging, we simply bet one unit on game one and one unit on game two, making the second bet dependent on winning the first.

#1 Lose $100
#2 Lose $100
#3 Lose net $9 (Win $91 on game 1 and lose $100 on game 2)
#4 Win $182 ($91 win for the $100 bet on each game)

The result is losses of $209 and a win of $182 in the series of four, for a mere $27 loss. By simply betting $100 on the first game, and if it loses betting nothing on the second game, but if it wins betting $100 on the second game, you will get the same effect as the parlay and hedge but cut your losses almost in half from $50 to $27 in every four games. Better yet, you don't even need to make the second call that you must make if you are going to hedge. Simply make an "if" bet early and sit back. The bet would be “$100 on the Knicks if $100 on the Lakers.” If the Knicks lose, you have no bet on the Lakers and lose $100. If the Knicks win, you will have a $100 bet on the Lakers.

Making a parlay and hedge bet accomplishes nothing more than the “if” bet, but, whether you are a winner or a loser, the parlay and hedge will increase your cost of betting by a huge 85% over the “if” bet. .

That does not mean that “if” bets are a good way to bet. Actually, "if" bets are generally not a good idea either, because they make the bet on the second game dependent on the unrelated event of a win on the first game, but that's a matter for another article. None of the above betting methods is good, but as between all the possible methods of making a parlay-type, dependent bet on two teams, the parlay and hedge technique is the worst. It will cause the greatest losses, and if you have a wining percentage, will provide the smallest wins.

Speaking of winning, the greater your winning percentage, the more the parlay and hedge technique will cost you. There are two reasons:
1. If you have a winning percentage, you will win the first game more often, and therefore you will pay the additional vig on the hedge bet more often.
2. If you have a winning percentage, you will win the second game more often, and therefore you will lose the hedge bet more often, and it will cost you money more often..

At 10%, the vig on parlays is already more than double the 4.54% vig on straight bets. Hedging the second game in the parlay adds another 4.54% vig to the mix. It is fascinating that gamblers have managed to invent the parlay and hedge technique, given how successful merely betting parlays has been at increasing player loss and decreasing player win.

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