Hedging Techniques

[Disenchantedguy]

Hi all,
Long time reader, first post... This Saturday I sat beside a man who was alive going into the last leg of the late pick 4 at Belmont. (The one that paid @$70,000). I believe he was alive to 3 horses in the final race. He amazed me by just essentially "letting it ride". He made just a couple of small hedge bets and essentially rolled the dice. I am certainly jealous and envious of people with that kind of bravado.. the guts to just go for it... As for me, my pencil would have been smoking as I would have been trying to hedge like crazy to guarantee something. He ended up missing out on the pick 4, but did hit a small saver wager for probably $1,000. This brings me to my question. When and how do you decide to hedge in a multi-leg wager? A few weeks ago, I was alive to 5 of 8 horses in the final leg of a pick 3 and was looking at payouts anywhere from $800 to $1100 dollars. The odds of the 3 horses that could beat me were like 16 to 1, 25 to 1, and 5 to 1. This was a Grade 3 race, and with 1100 dollars on the line; suddenly those three horses pp's started looking a whole lot better! I was stymied on the best way to handle the situation.. I don't have the "let it ride mentality". The 16 to 1 and 25 to 1 were easy enough to manage, a modest win bet on each would assure a decent return without hedging myself out of significant profit. The 5 to 1 horse was a different story. His odds were low enough to require a significant wager and deep cuts to my profit. I ended up wheeling him in the exacta for a few bucks and left it at that. All the hedging was for naught, as one of my original selections won and I was then kicking myself for all the hedging. What are some of the techniques you guys use for hedging? Straight win bets? Some types of exactas, tris, supers? I'm curious to know how others handle these situations?

thanks!
Jason

[Exotic1]

I don't know but this is funny: "suddenly those three horses pp's started looking a whole lot better!"

They suddenly start showing up as class drops, wide against bias. I know what you mean.

[Stillriledup]

If i make a horizontal bet, i'll actually consider some tickets with the horse in the final race that's most likely to be at least 2nd....that way, if i come alive to that horse for huge money, i'll feel good about a large exa or tri with "the horse or horses i'm worried about" over my main horse. If i win, i crush the horiz, if i'm 2nd, i crush the exotic.

I've had situations in the past where my hedge actually made me more money than my main ticket with my "needed" horse finishing 2nd.

My hedging totally depends on how badly i need the money at the time, how much i'm alive for and how "tight" i can punch my hedge.

There was a pick 5 i was alive for very good money going back a few months at SA, and in the last leg, i was 5 deep and then looked up and saw the only "main contender" i failed to use was Bejarano on this 5-1 shot. So i ended up hammering Bejarano on top in exas and tri's with my 2 best outcomes and sure enough, Bejarano beat my main horse on a dirty head bob...when the smoke cleared, i would have only done a smidge better had my pick 5 horse won, the hedge ended up making me some nice money, i was able to punch it tight and not invest a lot and made a good score.

[horses4courses]

I always try to hedge in order to guarantee a good ROI.
Obviously, if a number of the horses that can beat you are at short odds,
it gets really tough, even impractical, to protect yourself.

I'm sure someone on here has a math-based hedging formula.
Personally, I just try to guarantee a reasonable ROI on my initial wager.
Hopefully, the horses I need in the final leg are among the favorites.
Makes it easier to protect when betting insurance for a smaller outlay.

As mentioned above, there are players who live and die by their picks.
Taking out hedging insurance to them is a sign of weakness.
I come from the school that likes taking the gamble out of the proceedings.
Locking up a good profit is a job well done, even if you end up with less.

[therussmeister]

I always try to hedge in order to guarantee a good ROI.

I never bet horizontal exotics so perhaps you should ignore this, but I think most hedging results in reduced ROI, and you shouldn't do that. Would you bet those horses you are thinking of hedging if you were not alive in the exotics? If the answer is no, then don't hedge, but if they are a legitimate overlay, then go for it. I believe one of the most common mistakes of horseplayers is the "I must win now" attitude. The only time you must win now is if your bankroll is precariously low and you should diligently avoid putting yourself in that position.

[Thebigguy]

If i make a horizontal bet, i'll actually consider some tickets with the horse in the final race that's most likely to be at least 2nd....that way, if i come alive to that horse for huge money, i'll feel good about a large exa or tri with "the horse or horses i'm worried about" over my main horse. If i win, i crush the horiz, if i'm 2nd, i crush the exotic.

I've had situations in the past where my hedge actually made me more money than my main ticket with my "needed" horse finishing 2nd.

My hedging totally depends on how badly i need the money at the time, how much i'm alive for and how "tight" i can punch my hedge.

There was a pick 5 i was alive for very good money going back a few months at SA, and in the last leg, i was 5 deep and then looked up and saw the only "main contender" i failed to use was Bejarano on this 5-1 shot. So i ended up hammering Bejarano on top in exas and tri's with my 2 best outcomes and sure enough, Bejarano beat my main horse on a dirty head bob...when the smoke cleared, i would have only done a smidge better had my pick 5 horse won, the hedge ended up making me some nice money, i was able to punch it tight and not invest a lot and made a good score.


This is excellent advice. Get the redboard in and everything. Well done bro.

[horses4courses]

I never bet horizontal exotics so perhaps you should ignore this, but I think most hedging results in reduced ROI, and you shouldn't do that. Would you bet those horses you are thinking of hedging if you were not alive in the exotics? If the answer is no, then don't hedge, but if they are a legitimate overlay, then go for it. I believe one of the most common mistakes of horseplayers is the "I must win now" attitude. The only time you must win now is if your bankroll is precariously low and you should diligently avoid putting yourself in that position.

I see your point, and it makes sense for some.
My scenario seeks to eliminate the greed factor.

As I said before, some live and die by their picks.
Each to their own.

[horses4courses]

I never bet horizontal exotics so perhaps you should ignore this, but I think most hedging results in reduced ROI, and you shouldn't do that. Would you bet those horses you are thinking of hedging if you were not alive in the exotics? If the answer is no, then don't hedge, but if they are a legitimate overlay, then go for it. I believe one of the most common mistakes of horseplayers is the "I must win now" attitude. The only time you must win now is if your bankroll is precariously low and you should diligently avoid putting yourself in that position.

Let me run these examples by you.

Situation A: You made a futures bet on California Chrome for the KY Derby last November. $200 bet @ 250-1 odds to net you $50K. Do you just sit back and watch in early May, or do you take out some insurance on possible dangers so that you are more likely to win at least a few grand?

Situation B: You bet futures on the Tampa Bay Buccs to win the 2015 Super Bowl. $200 @ 400-1. They are facing the Seahawks for the NFC C'ship, and the game is a pickem. Sit on your hand, or lock up some money?

I know what I would do, and I realize it's not everyone's cup of tea.

[Robert Fischer]

some thoughts on hedging:

Decide if you are a "hedger". Hedging generally lowers your long-term ROI if you are grinding out a decent percentage of winning multi-race wagers. However, If you are not using a long-term strategy, then hedging is going to be smart. (The other exception that comes to mind is a jackpot situation).

If you are likely to hedge, and you have a non-favorite-single, or a chaos race earlier in the sequence (where you plan to get most of your value from), then consider using the favorites in the final leg.
- False favorites in the last leg are great for winning money, just don't necessarily look to hedge in those situations. You aren't going to want to hedge with a favorite that you excluded from multis.

When actually hedging, don't be afraid to exclude the long shots (maybe the 16-1 and 25-1 from your example), instead concentrate on hedging with only one or two mid-range fringe contenders that you legitimately feel could upset the apple cart. (maybe the 5-1 shot from your example).

Unless you have jackpot probables, design the hedge part of the wager to break even, or get back a small profit from your initial multi-race investment. You bet your opinion with the multi. Now you don't want to bet a ton against your opinion.

[thaskalos]

Hi all,
Long time reader, first post... This Saturday I sat beside a man who was alive going into the last leg of the late pick 4 at Belmont. (The one that paid @$70,000). I believe he was alive to 3 horses in the final race. He amazed me by just essentially "letting it ride". He made just a couple of small hedge bets and essentially rolled the dice. I am certainly jealous and envious of people with that kind of bravado.. the guts to just go for it... As for me, my pencil would have been smoking as I would have been trying to hedge like crazy to guarantee something. He ended up missing out on the pick 4, but did hit a small saver wager for probably $1,000. This brings me to my question. When and how do you decide to hedge in a multi-leg wager? A few weeks ago, I was alive to 5 of 8 horses in the final leg of a pick 3 and was looking at payouts anywhere from $800 to $1100 dollars. The odds of the 3 horses that could beat me were like 16 to 1, 25 to 1, and 5 to 1. This was a Grade 3 race, and with 1100 dollars on the line; suddenly those three horses pp's started looking a whole lot better! I was stymied on the best way to handle the situation.. I don't have the "let it ride mentality". The 16 to 1 and 25 to 1 were easy enough to manage, a modest win bet on each would assure a decent return without hedging myself out of significant profit. The 5 to 1 horse was a different story. His odds were low enough to require a significant wager and deep cuts to my profit. I ended up wheeling him in the exacta for a few bucks and left it at that. All the hedging was for naught, as one of my original selections won and I was then kicking myself for all the hedging. What are some of the techniques you guys use for hedging? Straight win bets? Some types of exactas, tris, supers? I'm curious to know how others handle these situations?

thanks!
Jason

Welcome to the board, Disenchantedguy,

Whether to hedge or not depends on several things. How spread out and confident are we in the race to come...and how great is the ratio between the possible payoffs and the investment already made in the wager? Also...how confident are we that we will cash in the event that we DO hedge? Many people use exactas and trifectas as hedge bets...and end up missing on the main wager AND the hedge bet. I, personally, have a hard time imagining a realistic situation in which I would be tempted to hedge my bet going into the last race of a horizontal super-exotic wager. I was live to four horses in the last leg of a pick-5 recently...and I stood to collect between $3,800 and $6,000+ if I connected...on an investment of $432. I was confident in my four horses so I didn't hedge...but even if I wanted to hedge -- how could I have done an adequate job of it? There were six horses that I DIDN'T have covered...and three of those had a somewhat realistic chance of winning the race. But I felt foolish betting on three horses to win when these horses were deemed by me to be inferior to the horses I had already covered...and I had no confidence in making a cheaper exacta or trifecta bet to cover myself. It is not as simple to hedge in everyday horse racing situations as it is to hedge to protect a futures wager like the one Horses4courses alluded to in a prior post.

As it turned out...one of the longest shots in the race beat me out and I collected nothing. But I took comfort in the belief that I made the right decision...and making the right decisions is the most that I can do in this game.

When it comes down to it...I guess it all boils down to the player's temperament and disposition...and his chief objective in playing this game. In my opinion...you lose the most, when you try to protect yourself from losing.

I would like to add that I enjoyed reading your initial post here...and I look forward to more postings from you in the future. :ThmbUp:

[Some_One]

Welcome to the board, Disenchantedguy,

Whether to hedge or not depends on several things. How spread out and confident are we in the race to come...and how great is the ratio between the possible payoffs and the investment already made in the wager? Also...how confident are we that we will cash in the event that we DO hedge? Many people use exactas and trifectas as hedge bets...and end up missing on the main wager AND the hedge bet. I, personally, have a hard time imagining a realistic situation in which I would be tempted to hedge my bet going into the last race of a horizontal super-exotic wager. I was live to four horses in the last leg of a pick-5 recently...and I stood to collect between $3,800 and $6,000+ if I connected...on an investment of $432. I was confident in my four horses so I didn't hedge...but even if I wanted to hedge -- how could I have done an adequate job of it? There were six horses that I DIDN'T have covered...and three of those had a somewhat realistic chance of winning the race. But I felt foolish betting on three horses to win when these horses were deemed by me to be inferior to the horses I had already covered...and I had no confidence in making a cheaper exacta or trifecta bet to cover myself. It is not as simple to hedge in everyday horse racing situations as it is to hedge to protect a futures wager like the one Horses4courses alluded to in a prior post.

As it turned out...one of the longest shots in the race beat me out and I collected nothing. But I took comfort in the belief that I made the right decision...and making the right decisions is the most that I can do in this game.

When it comes down to it...I guess it all boils down to the player's temperament and disposition...and his chief objective in playing this game. In my opinion...you lose the most, when you try to protect yourself from losing.

I would like to add that I enjoyed reading your initial post here...and I look forward to more postings from you in the future. :ThmbUp:

There becomes a point where the +EV decision might not be the right decision; in situations where there is a very large payoff, I think it would be worth the -EV bets to reduce variance.

Think about Deal or No Deal, two cases left, a Million and zero. The banker offers you 400K, it's easily +EV to go for the million, but can you afford to give up the 400K to go for it? I probably wouldn't and take the -EV play and the bankers offer for the sake of variance.

[thaskalos]

There becomes a point where the +EV decision might not be the right decision; in situations where there is a very large payoff, I think it would be worth the -EV bets to reduce variance.

Think about Deal or No Deal, two cases left, a Million and zero. The banker offers you 400K, it's easily +EV to go for the million, but can you afford to give up the 400K to go for it? I probably wouldn't and take the -EV play and the bankers offer for the sake of variance.

That's why I made the distinction between the "everyday horse racing situations"...and the once-in-a-lifetime, "million or zero" situations.

I thought we were talking about "real life" here...

[Some_One]

That's why I made the distinction between the "everyday horse racing situations"...and the once-in-a-lifetime, "million or zero" situations.

I thought we were talking about "real life" here...

You just never know where someone's 'million' point is, I'm sure for you it's actually a 7 figure payout, but for a non pro like me, 20K will probably get me thinking.

[Dahoss2002]

You just never know where someone's 'million' point is, I'm sure for you it's actually a 7 figure payout, but for a non pro like me, 20K will probably get me thinking.
If I am live to 3 horses in a 12 horse field, there will be no hedging. If I'm live to 3 horses in a 6 horse field, there will be win money on every horse I do not have. How much money depends on their odds.

[ArlJim78]

I'll make hedge wagers on a case by case basis. If the bankroll is thin it's usually a let it ride situation though. I'll usually start by looking at how much profit I'll have coming back from the lowest payoff that I'm live to. Then I'll decide how much of that profit I'm will to use as a hedge. Typically I'll cap it at 10% or 15% of the profit of the lowest payoff. By capping the amount of the hedge this way I won't lessen the ROI too much. The last thing you want to do is make so many hedges that you win your prime wager and only break even or barely profit from having placed too many hedge wagers.

In some cases you can get a fair amount of coverage for little investment, especially if you're covering higher odds horses simply using win bets. If the horses I'm live to are the higher odds type then typically I will cover them by using them to place in exacta's or depending on their odds sometimes trifecta's with the horses that worry me. My thinking is that I want to have some protection should my longs odds prime play run a gallant second, rather than collecting zero it's nice to have a consolation prize. But I do insist that if my prime plays don't win that they at least come in second, I'm not interested in covering situations beyond that. If I'm conpletely wrong then I'd rather just take the loss and move on.

I look at it like insurance. I will typically calibrate my hedge wagers with the idea to only recover my original investment should I not hit my main wager. However if the insurance is too expensive, meaning I can't get adequate coverage against a loss using the allotted hedge bankroll, then a let it ride approach is what I will end up doing. Better to keep that powder dry for the next prime horizontal wager.

[banacek]

I hedge regularly. It is one of the techniques that has helped make me a winning player. I have found that the reduction of stress (because of shorter losing streaks) has made my decision-making much improved. And yes the ROI does go down, but the amount you can bet goes up because of the reduction of risk.

[castaway01]

I think it's a personal decision for how much risk and pain you can handle. I used to hedge but as I got used to swinging for the fences I rarely do. I think for some it's a positive psychological boost to get something back, but it does cost you in the long run (unless your hedges regularly beat your original choices, in which case you have other problems).

I'll give you a couple times it might make sense:
1) If you have a few plausible longshots you can cover reasonably with win bets and are alive to a big payoff, it might be wise to do so for your sanity.
2) If you just miss something and get to the last leg of a bet and realize there is a horse that is as plausible as your key and it's basically a two-horse race. Finding a way to cover that other horse so you get your money back might make you feel better.

Otherwise, I try to stick with my original bets and ride the streaks, good or bad.

[Stillriledup]

I think it's a personal decision for how much risk and pain you can handle. I used to hedge but as I got used to swinging for the fences I rarely do. I think for some it's a positive psychological boost to get something back, but it does cost you in the long run (unless your hedges regularly beat your original choices, in which case you have other problems).

I'll give you a couple times it might make sense:
1) If you have a few plausible longshots you can cover reasonably with win bets and are alive to a big payoff, it might be wise to do so for your sanity.
2) If you just miss something and get to the last leg of a bet and realize there is a horse that is as plausible as your key and it's basically a two-horse race. Finding a way to cover that other horse so you get your money back might make you feel better.

Otherwise, I try to stick with my original bets and ride the streaks, good or bad.

This is a good post, i do often make the "mental health" wager (as we sort of suspect, SRU needs all the mental health he can get!) :D

[horses4courses]

I hedge regularly. It is one of the techniques that has helped make me a winning player. I have found that the reduction of stress (because of shorter losing streaks) has made my decision-making much improved. And yes the ROI does go down, but the amount you can bet goes up because of the reduction of risk.

We went to the same school of wagering :ThmbUp:

It's not like I play horizontal wagers very often.
Much less now since Australia took away their PK4.
These types of situations usually only arise every few months.
If I played horizontal wagers on a daily basis, with a larger bankroll,
it's likely that I would play it differently, and not insure unless
my payouts went into 5 figures.

Anything over a $500 payout (offering ROI over 400%) is, for me,
worth insuring if the odds allow. If insurance is too costly,
and would bring my ROI way down, I play my hand.

[1st time lasix]

As a pick five and pick six carryover player...I run into this hedging scenaro rather often. I ONLY consider it--- if i have already landed one... or possibly two longer odds "seperators" that has already eliminated many of the pool tickets--- virtually locking a nice overlay payoff should I be correct the rest of the way. At that time...{which in some cases may even have two or even three legs left}....I look to see if I have B or C rated horse that I may no longer have covered on the live ticket--- That also happens frequently because I usually buy multiple tickets in the Crist method. I may use a double or pick three now combining them in. My goal is not really to make a big score with these "hedge" bets...it is to "get out" of the sequence slightly ahead of the orignal cost for playing. Say I put $200 into the pick five and I have one 9-1 and a 6-1 already "in" It is then I begin to consider it because the payoff will certaily be a solid "signer." I will never do it horizontally with an odds-on favorite in the first leg of the double or pick three. There are far better ways to hedge using the win pool or the exacta pool. If I get to the last and see the will pays...I always look to the the ones I still have live....AND to to the lowest payouts that i don't have. In the thirty minutes i scrutinize those other horses carefully again. Did I miss something? Should i just simply stick to my guns. It is all about handicpaping opinions.

[cnollfan]

Over time I have become more and more of a hedger. I used to never hedge.
I could be alive to a horse in the double, think "he's a great price," and bet him to win too. There were no Pick 3s / Pick 4s in those days.

Agree with many previous statements in the thread. I don't want the hedge to eat into too much of my potential profit. If it does, then it's not really a good hedging situation and I will just stick with what I have and hope for the best.

If alive in the last leg to several good payers, I might look at the horse or two at a decent price with the best chance to win that I don't have, and bet that one or two to win. Or if I don't have the chalks, I might bet my alive horses underneath the favorites I don't have. But if I had been intentionally betting against a chalk in the last leg I wouldn't bet much on him for a hedge, maybe just a $1 ticket to appease the gambling gods.

Say that I was alive to a chalk horse A and two longshots B and C, and didn't dislike but wasn't alive to the other chalk D. I might bet exactas of D / B, C and a trifecta of D / A / B, C.

Also as noted by others, if I have started a multi-race wager like a Pick 4 starting in Race 7 with a nice longshot winner, I might start a Pick 3 on Race 8 using the contenders I don't have with the horses I am alive to in Races 9 and 10. I might start another Pick 3 using the horses I am alive to in Race 8 and Race 10 with the contenders I am not alive to in Race 9, as well as the alives in Races 8 and 9 with the non-alive contenders in Race 10.

[Aner]

I like to bet long shots but I am basically a $2 better, sometimes $5. I used to try covering my long shot in the place hole by betting the favorite or second favorite on top of the long one. I stopped when I realized my win bets were winning about 10% long term but when I hedged for $1 and the long shot won, I was losing 20% of my total bet.

My point is hedging should only be used when you have a chance for big score, and that doesn't happen with small bets.

[cashmachine]

In all posts above people mentioned hedging only in horizontal exotics; do you think it make sense to hedge usual bets?

[HUSKER55]

I have a question for you guys and gals.

If you are playing your system and your system has gotten you this far, what has changed to make you want to change?

Did the morning long-shots come "live"?