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What is Parlay Betting?

What is Parlay Betting?

Hedging a bet is a strategy used in an attempt to limit your risk while still maximizing potential rewards. Often, it is also be used after you have placed an earlier initial bet on one side and no longer feel confident in that decision. In certain scenarios, hedging can even allow one to bet in a way that guarantees a payout.

Lets look a little closer at the general theory and some example implementations:

Hedging involves placing bets on multiple possible outcomes in order to increase the odds that you win money or limit the chances that you lose big.

Limiting Risk on an Existing Bet

Odds that the Favorite Wins Decrease

As an example of limiting risk, lets say you bet $200 on the Warriors to beat the Thunder in an upcoming game at a money line of:

Warriors -220
Thunder +210

The day before the game, you find out that Stephen Curry has a sprained ankle and is questionable to play. Suddenly, you feel less confident about your bet. Instead of crossing your fingers and hoping for the best, you could attempt to hedge in order to limit your potential losses.

If Curry is questionable, the odds have probably shifted. For this example, lets say the money line is now:

Warriors -180
Thunder +170

If you want to limit your possible losses to a maximum of $100 instead of losing your entire $200 original bet, you could hedge by placing an additional $59 wager on the Thunder.

Your possible outcomes are now:

A) The Warriors win, you collect $91 in winnings from your original $200 bet ($200 * 100/220 = ~$91) and you lose your second $59 hedge bet on the Thunder. In the end, you still walk away having won $32 ($91 – $59 = $32).

B) The Thunder win, you lose your original $200 bet, but you win $100 from your second hedge bet ($59 * 170/100 = $100). In the end, you only lose a total of $100 (-$200 + $100 = -$100).

When deciding whether to hedge or not, it’s important to evaluate what the maximum winnings and losses are for both scenarios. In the above example, these results are the following:


ScenarioMax Winnings PossibleMax Losses Possible
Don't Hedge+$91-$200

Now, if Curry’s injury has pushed you even further and you’d rather bet on the Thunder, you can hedge even further and reverse your bet.

If you still want to limit your maximum loses to $100, you could place a $191 bet on the Thunder at the updated money line. This new bet in essence cancels out your original $200 bet on the Warriors and places additional money on the Thunder.

The below table shows the possible outcomes for each of the previously discussed betting strategies:

ScenarioWarriors WinThunder Win
Keep Original $200 Bet on Warriors+$91-$200
Hedge Original w/ $59 Bet on Thunder+$32-$100
Reverse Original w/ $191 Bet on Thunder-$100+$125

Odds that the Favorite Wins Increase

In an alternative scenario, lets say that Russell Westbrook sprains his ankle instead of Curry. Now the money line shifts the Warriors to being even bigger favorites. Hypothetically, lets set the new odds as follows:

Warriors -340
Thunder +330

Fortunately, you’ve already placed a $200 bet on the Warriors at a better money line. At the original odds, your $200 bet will net you a $91 payout for a Warriors win. If you had instead waited, that same $200 bet placed now would only result in a payout of $59 for a Warriors win.

You can either sit back and feel good about your good fortune, or, if you want to eliminate all potential risk, you could hedge your bet by placing a $61 wager on the Thunder. While hedging reduces your upside substantially, it completely eliminates your ability to lose money. The decision to hedge is thus very dependent on the bettors risk appetite and their confidence in the Warriors ability to win. This potential hedge is evaluated below against the option to not hedge and stick with the original bet:

ScenarioWarriors WinThunder Win
Keep Original $200 Bet on Warriors+$91-$200
Hedge Original w/ $61 Bet on Thunder+$30$1

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