Would you hedge USC, if you were up on them from pre-season?
 

Pre-season, I liked USC a lot, even at the odds that were being offered. I took SC to win the championship at +175.

Currently, I can lock in "Will USC win the Rose Bowl?" NO at +152, for guaranteed profit either way. Alternatively, Texas is at +222, assuming they win out (although there's some risk hedging this way).

If it were you, would you hedge with one of these or other options, or would you just ride it out on SC?

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I also liked Reggie Bush a lot pre-season. I put some money on any USC player winning the Heisman at +155, and some money on Reggie Bush specifically winning at +460. Looking pretty good now, with current odds on Bush all the way down to -200.

Should I hedge with any of the following options, or just ride it out on Bush?

"Will Reggie Bush win the Heisman Trophy?" NO +188
"Will a USC player win the Heisman Trophy?" NO +407

Re: Would you hedge USC, if you were up on them from pre-season?
 

I wouldn't hedge either of them, but if I did, I'd go with Texas +222 and a USC player not to win the Heisman +407.

Re: Would you hedge USC, if you were up on them from pre-season?
 

I would definitely go with Texas +222 as their hedge. Texas' 4 games left are @ Oklahoma St, Kansas, @ Baylor, @ Texas A&M. Then a Big XII title game, with the two top contenders already suffering blowout losses to TX. I think the chances of TX not going unbeaten at this point are miniscule. Also, I feel that their chances or getting jumped are also tiny.

It depends on what you think the chances are of USC losing before the RB. IMO, not enough to pass up +222 for +152.

Re: Would you hedge USC, if you were up on them from pre-season?
 

No. Unless the counter bets have value in and of themselves, don't lock out your potential profit.

Re: Would you hedge USC, if you were up on them from pre-season?
 

You assume that Texas gets into the Rose Bowl if they win out, which isn't necessarily a lock. If USC, UT, and VaTech all win out, I think UT is the one on the outside looking in due to late season SOS.

Re: Would you hedge USC, if you were up on them from pre-season?
 

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You assume that Texas gets into the Rose Bowl if they win out, which isn't necessarily a lock. If USC, UT, and VaTech all win out, I think UT is the one on the outside looking in due to late season SOS.

[/ QUOTE ]

Yep, VA Tech will definitely move past TX if both are undefeated.

Re: Would you hedge USC, if you were up on them from pre-season?
 

I disagree, whip. I just don't think Va Tech can make up the ground. There is real feeling that Texas is the best team in the country. They are currently #1 in the BCS, and I don't see them losing that much ground over the last 5 games. I think Va Tech has to count on USC losing.

Re: Would you hedge USC, if you were up on them from pre-season?
 

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There is real feeling that Texas is the best team in the country.

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Says who? Both polls with actual people voting have Texas #2 by a substantial margin. Computers have no feelings, and will just compute the raw numbers. If VaTech beats Miami, BC, and whoever in the ACC Champ game, they will hurdle Texas, who plays Division II teams from here on out. SOS counts for a lot, more than I think you're willing to accept.

I now notice you're from Austin... I completely understand your position now.

Re: Would you hedge USC, if you were up on them from pre-season?
 

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Yep, VA Tech will definitely move past TX if both are undefeated.

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Has this been documented at all? It seems likely they would pass Texas (and probably USC) in the computer rankings should they win out, but wouldn't they also have to pass Texas in at least one of the polls?

Not saying it won't happen, but everything I've seen has Texas and USC on a collision course (assuming they both stay undefeated, of course).

Hedging
 

There are three reasons to make a bet that hedges a previous bet:

1. The second bet - the hedge - has positive expectancy itself.

2. Your risk is so large, that you'd get sick to your stomache (or your wallet) if you lose.

3. The hedge itself allows you to play other related plays (that have positive EV) that you found too risky to play combined with your current position. But the combination of this new positive EV play and the hedge, must have positive EV.

In your case, it seems the only relevant issue is #1 - does the hedge have positive EV. So, would you bet against USC now if you didnt' have the USC bet to begin with?. I'll leave that answer to you and other posters.

Re: Would you hedge USC, if you were up on them from pre-season?
 

whipsaw- Re: USC #1 in the polls. Yep. And Texas gains first-place votes every week. And I meant feeling among fans and commentators, which isn't factored in directly, but makes vote-changing more and more likely. Texas could win eleventy billion to zero and some people are not going to remove USC from the #1 spot until they lose. But they are certainly playing the best and are the only team in the top 10 in both offense and defense.

As far as your location shot, I'm an Oklahoma fan, not a Texas fan, and I'm being objective about it. I'm not a "homer" when it comes to sports analysis. I just bet on Baylor to cover vs OU last week. Texas would have to be WAY behind Va Tech in the computer rankings to overcome the substantial lead they have in the human polls, which count 2/3 of the formula.

Re: Would you hedge USC, if you were up on them from pre-season?
 

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eleventy billion

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Wow, that's the exact # of units I've lost on baseball this playoffs. [img]/images/graemlins/grin.gif[/img] [img]/images/graemlins/grin.gif[/img]

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Texas would have to be WAY behind Va Tech in the computer rankings to overcome the substantial lead they have in the human polls, which count 2/3 of the formula.

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They will be WAY behind by the end, if VaTech beats BC, Miami, and someone in the ACC Champ game while UT plays girls lacrosse teams the final five weeks. Texas will lose votes to VaTech, especially after the Miami game, enough for VaTech to make up ground in the human polls.

Re: Would you hedge USC, if you were up on them from pre-season?
 

Thanks for the good input in general, guys. Some things I like here, some I'm not sure about.

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I would definitely go with Texas +222 as their hedge.
It depends on what you think the chances are of USC losing before the RB. IMO, not enough to pass up +222 for +152.

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It's not just the risk of USC losing before the Rose Bowl. It's also the risk that Texas is not the one to play them. You may feel that risk is miniscule, but the board seems split on what happens if VT also wins out.

How is the math below?

(1) Likely lines imply that the chances of USC winning out are somewhere around: 97% against Wash St., 92% against Stanford, 87% against Cal, 92% against Fresno St. 80% against UCLA. (I actually think their chances against Cal and UCLA are a little worse, but I gave SC the benefit of the doubt for this exercise).

Multiplying all of those winrates only gives them a 57% chance of winning out. Is that the right way to calculate their chances of being undefeated?

(2) Meanwhile, on another thread, posters are estimating Texas' chance of winning out at 85-89%. Even if they do win out, there's still the VT risk. Let's say there's a 50% chance of VT winning out, and if they do, a 25% chance that they pass Texas in the BCS (although some posters here seem to think that chance might be closer to 50%). That makes a 12.5% chance Texas is not in the Rose Bowl, even if they win out.

So Texas' chance of being in the Rose Bowl is their likelihood to win out (87%) times the likelihood of not being in the Rose Bowl even if they do win out (87.5%), which equals 76%.

(3) USC must win out, and Texas also must be in the Rose Bowl, in order for the Texas hedge to be better than the USC "No" hedge. Thus, the risk of either of those happening is 1-(0.57*0.76)=57%.

(4) Okay, here's where I don't know how to calculate things. It seems clear to me that if the Texas hedge loses 57% of the time, then the USC "No" hedge is much better. But what is the math behind this? How do I calculate how often a bet needs to win, in order for +222 to be better than +152?

Re: Would you hedge USC, if you were up on them from pre-season?
 

OK, well let's look at the math of it. Would you agree that the worst-case scenario for Texas in the computer polls would be an average of 4th place? That's assuming they are behind every unbeaten team at the end of the year, and that there are 4, which is the maximum. And the best-case for VaTech is 1st in every one? So that would be a spread of .120 in the BCS (1.000 for VaTech's computer component, .880 for Texas'). So VaTech would need to be at least within .06 of Texas in each poll. They are currently .05 and .04 behind. So it is close with the polls as is, assuming a best case scenario for VaTech in the computers. It is unlikely that SC or Georgia/Bama will pass UT in the computers. If Texas can maintain #2 rankings in at least 6 of the computers, VaTech would have to gain immense ground in the polls. Even if every computer poll had it Va Tech at 1, SC at 2, Texas at 3, Texas would still lead Va Tech right now due to the human polls.

Re: Would you hedge USC, if you were up on them from pre-season?
 

llabb,

I would say that you are overstating SC's chances of losing any of their remaining games. Cal is too low, they are not a good team. I'd put UCLA more in the low 90s area. Fresno 95, Cal at 95, Wazzu at 99.9.

Same for Texas. OSU is 99.999999, as is KU. Baylor is 99, and A&M is 97. Big XII title game is 95.

I gave the math on VTech overtaking Texas. Barring major struggles by Texas and dominating wins by VTech, it's just not happening IMO.

Re: Hedging
 

[ QUOTE ]
There are three reasons to make a bet that hedges a previous bet:

1. The second bet - the hedge - has positive expectancy itself.

2. Your risk is so large, that you'd get sick to your stomache (or your wallet) if you lose.

3. The hedge itself allows you to play other related plays (that have positive EV) that you found too risky to play combined with your current position. But the combination of this new positive EV play and the hedge, must have positive EV.

In your case, it seems the only relevant issue is #1 - does
the hedge have positive EV. So, would you bet against USC now if you didnt' have the USC bet to begin with?. I'll leave that answer to you and other posters.

[/ QUOTE ]
Great post, King Yao. I think there could be a couple other reasons as well:

4. Your estimation of the odds have changed, in the time elapsed between the original wager and the hedging opportunity; or your assessment of which side of the bookmakers' odds you prefer to be on has changed.

For example, if I thought USC winning the Rose Bowl was +EV at +175 pre-season when I took the wager, but no longer think they are a good bet at -170, I would seek to hedge it, and lock in the winnings I've gained from the odds differential. Even if your hedging wager were slightly -EV, the resulting combination could be +EV compared to the EV of letting the original wager ride. That is what I am contemplating now.

5. To reduce variance. Even if I am comfortable with the risk, and losing the amount wagered would not make me sick, I might be more comfortable reducing volatility, especially when I am booking a win and not simply hedging a loss.

I believe that few sports bettors actually wager less than 1% of their bankroll per play, in the disciplined manner that many suggest should be done. Even for those who are disciplined with their poker bankroll, and do not play above their limits, it seems that they are often wagering a higher % of their bankroll than they should.

This leads to a higher risk of ruin. Longer odds, by definition, mean more likelihood of loss. Hedging to book a win, while forgoing profit potential, also minimizes risk, reduces variance, and enables you to more steadily grow your bankroll, perhaps leading to higher unit amounts and greater future earnings.

Re: Would you hedge USC, if you were up on them from pre-season?
 

[ QUOTE ]
llabb,

I would say that you are overstating SC's chances of losing any of their remaining games. Cal is too low, they are not a good team. I'd put UCLA more in the low 90s area. Fresno 95, Cal at 95, Wazzu at 99.9.

Same for Texas. OSU is 99.999999, as is KU. Baylor is 99, and A&M is 97. Big XII title game is 95.

I gave the math on VTech overtaking Texas. Barring major struggles by Texas and dominating wins by VTech, it's just not happening IMO.

[/ QUOTE ]

I simply took the lines for this week's games, and calculated the win probability. USC moneyline is -4000, while Wash is +2800, which means the linesmakers' estimation is for USC to be -3400, or 34:1. 34/25=97%.

For UCLA, I looked at current lines on games. A line of -7 translates to -265, or 2.65:1 = 73%. A line of -14 translates to 5.35:1 = 84%. USC vs. Notre Dame's line was somewhere between there, if I remember right. UCLA's line will be even closer, if they are still undefeated when they meet.

This is a more accurate estimation of win %'s than estimating them yourself. It is very difficult for most individuals to distinguish the difference between a 95% and 97% likelihood of winning.

Your 99.9% for USC over Wash St. means that Wash would not win 1 out of a 1000 times. There are enough intangible variabilities alone to cover that. And your Texas-OSU at 99.999999% is an obvious overexaggeration.

------------------------

Your math for the BCS standings, however, I am very interested in. For the posters who favor V-Tech, do you have any input on Black Aces' post?

Re: Would you hedge USC, if you were up on them from pre-season?
 

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OSU is 99.999999, as is KU.

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No they're not, and while I know (hope?) you're joking, it actually matters if you change 99.999999 to 99, which IMO is still too high.

Re: Hedging
 

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4. Your estimation of the odds have changed, in the time elapsed between the original wager and the hedging opportunity; or your assessment of which side of the bookmakers' odds you prefer to be on has changed.

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I think this is in Rule #1 that I wrote. If you think the true odds have changed, you shouldn't be betting the hedge unless it has zero or positive EV.

[ QUOTE ]
For example, if I thought USC winning the Rose Bowl was +EV at +175 pre-season when I took the wager, but no longer think they are a good bet at -170, I would seek to hedge it, and lock in the winnings I've gained from the odds differential.

[/ QUOTE ]

Let's assume you bet it at +175, and think it is now worth -160. You wouldn't want to bet it again if you saw USC -170, but at the same time, you should not be looking to bet the hedge unless you could get fair value: +160.

This is not a case where the risk is all that great. It's close to an even money bet. If the risk is really too much for you to stomache right now, then you overbet your bankroll in the beginning of the year.

Re: Would you hedge USC, if you were up on them from pre-season?
 

[ QUOTE ]
[ QUOTE ]
OSU is 99.999999, as is KU.

[/ QUOTE ]

No they're not, and while I know (hope?) you're joking, it actually matters if you change 99.999999 to 99, which IMO is still too high.

[/ QUOTE ]

I was joking. I do think 99 is about right for KU, but still too high for OSU. They are AWFUL AWFUL. They had to escape Montana St (I-AA) and Arkansas St in their own home stadium. They have lost every Big XII game by at least 27, save the Missou game, where they rallied from a giant deficit to make the final respectable. Plus, their starting QB is out. Their backup has 11 turnovers in 2 games against mediocre defenses, and now faces one of the best defenses in the league.

Put it this way, I wouldn't bet my life that Texas beats Okie St, but I'd bet my house.

Re: Would you hedge USC, if you were up on them from pre-season?
 

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There is real feeling that Texas is the best team in the country.

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Says who? Both polls with actual people voting have Texas #2 by a substantial margin.

Not that it is in the BCS, but the latest MCS poll (Masters Coaches Survey) has Texas receiving 13 of 16 #1 votes. It's not like these people don't know football either: the list: Master Coaches

Note: I don't offer this as any indicator of whether Texas will stay in the BCS top two, only to show that plenty of informed observers feel that Texas is the best team in the country right now.

Re: Would you hedge USC, if you were up on them from pre-season?
 

Texas' remaining schedule will likely be 'too easy' as far as the computer is concerned down the stretch. If they win out, they still could likely be caught from behind by one of the teams behind them that can play tougher games and still post the unblemished record.

Texas has pretty much maxed out their performance and ranking, theres nothing more then can really do to further seperate themselves from the teams trying to chase them down.

Re: Hedging
 

[ QUOTE ]
[ QUOTE ]
4. Your estimation of the odds have changed, in the time elapsed between the original wager and the hedging opportunity; or your assessment of which side of the bookmakers' odds you prefer to be on has changed.

[/ QUOTE ]
I think this is in Rule #1 that I wrote. If you think the true odds have changed, you shouldn't be betting the hedge unless it has zero or positive EV.
[ QUOTE ]
For example, if I thought USC winning the Rose Bowl was +EV at +175 pre-season when I took the wager, but no longer think they are a good bet at -170, I would seek to hedge it, and lock in the winnings I've gained from the odds differential.

[/ QUOTE ]
Let's assume you bet it at +175, and think it is now worth -160. You wouldn't want to bet it again if you saw USC -170, but at the same time, you should not be looking to bet the hedge unless you could get fair value: +160.
This is not a case where the risk is all that great. It's close to an even money bet. If the risk is really too much for you to stomache right now, then you overbet your bankroll in the beginning of the year.

[/ QUOTE ]

Thanks. I thought my #4 was a little different than your #1, but I guess you're right.

The risk is not too much for me to stomach, I'm just thinking about my #5, reducing variance. I did overbet my bankroll somewhat, seeing that I bet about 5% of my roll on each item.

SC winning the championship or not is not actually the bet I'm concerned about the most, it's just the one that garners the most discussion, because other posters are actually interested by whether that will happen or not. But you're right, it's not like a ton of money riding on that.

What I'm looking at is the Reggie Bush bet I laid down at +460 to win the Heisman. Current odds are around -200 on him to win. So my current expectation is 67% to win times 460, plus 33% to lose times -100 equals +275 per unit.

If I hedge this bet, I can guarantee myself +266 risk-free no matter what happens. So I can lock in win to boost my bankroll by 13.3%, or I can take this risk of losing 5% of my roll for the potential reward of winning 23%. That's a -18.3% loss if Bush loses the Heisman, vs only a 9.7% gain if he does win.

Yes, there's a tiny, tiny amount of -EV in the hedge, but how do I calculate for the variance I am reducing? We know that consistently betting 5% of your roll will get you quickly broke, even if you are laying +EV wagers. So I only bet that much more than normal where I am quite confident (and yes, this is undisciplined). I would not be heartbroke to lose, and it wouldn't drastically hurt my roll, it's still just 5% at the end of the day.

Okay, I know the standard math answer is to let it ride, rather than taking a tiny -EV hedge. But shouldn't booking a 13%+ win and eliminating variance count for something? i.e. How does the risk of ruin factor into the math?

Re: Hedging
 

as you stated, you bet more than your bankroll before the season started. there are two reasons to do that:

1. A screw-up. Everyone makes mistakes, and often people overbet their bankroll. The only way to "undo" this mistake is to learn from it.

However, it doesn't appear you made this mistake at all...it appears you made these big bets because you thought there was too much value in them. Right or wrong, it sounds like that was your analysis...and that brings us to #2.

2. You bet bigger than your bank-roll knowing (or thinking) that there was a good chance you could hedge and lock in money later on. Although the hedge may have negative EV, if you knew you wouldn't hedge, then you would not have bet nearly as big.

In a case like that, I do think it is correct to bet bigger than your normal bet knowing that you are going to make a negative EV hedge later on. Of course, the sum of the bets must have more positive EV than if you just made a smaller bet and let it ride.

For example, it appears your choice was (in the Heisman example):

A. Bet Bush with 2% bankroll, and let it ride...no negative heding necessary.

B. Bet Bush with 5% bankroll. Let the 2% ride, but knowing you will hedge the other 3% because there was too much value for you not to take it. The combination of positive EV you gained on the extra 3% you bet...and the small negative EV you expect to take in when you hedge.... is positive EV overall. So if you forgo the extra 3% on Bush just because you don't want to give up negative EV in the hedge, then you are actually giving up more postiive EV than you are giving up negative EV.

I think this is a good play. But it assumes that your projections are solid. In this case, it seems like it was rock solid.

I also think it falls under my rule #3:

3. The hedge itself allows you to play other related plays (that have positive EV) that you found too risky to play combined with your current position. But the combination of this new positive EV play and the hedge, must have positive EV.

In your case, the fact you thought you could hedge later in the year, allowed you to bet bigger...to make a play that you wouldn't make...or in your case, a play that you would not have played as big.

Re: Would you hedge USC, if you were up on them from pre-season?
 

[ QUOTE ]
Texas' remaining schedule will likely be 'too easy' as far as the computer is concerned down the stretch. If they win out, they still could likely be caught from behind by one of the teams behind them that can play tougher games and still post the unblemished record.

Texas has pretty much maxed out their performance and ranking, theres nothing more then can really do to further seperate themselves from the teams trying to chase them down.

[/ QUOTE ]

So you think they are going to finish 4th or worse in several computer rankings, or you think they are going to lose votes en masse in the human polls to Va Tech?

Re: Hedging
 

Again, you make perfect sense, King.

I think you have helped me understand my own plays, as sometimes I bet more than I normally should, just because I think there is so much EV in a play, but then I hedge out later. I intuitively simply thought it was due to making a nice EV play and then just being risk averse, but now I see that it is more akin to your #3, where I subconsciously intend to reduce the risk later. (However, I still occasionally lose the full larger-than-normal amount on the plays that go bad from the start, since there is then no cost-efficient way to hedge.)

Anyway, thanks for your posts, I appreciate how informative they are. I even went to your profile and the blog you linked. Do you also wager basketball, or mainly just football? The NBA is my # 1 sport, particularly longer-term futures, and I would be interested in your input. Last year I did fine on individual games, but much better on season-long wagers and playoff series wagers.

I have currently loaded up on (1) SA to win it all, with some hedging on Indy and Det, and (2) Indy or Det to win the East. Yes, there is Miami risk and surprise team risk, but I figured I would deal with that later, as the lines incorrectly overvalue Miami IMO. After this thread and your posts, I realize that I am thinking I can hedge out that risk later, when the hedging opportunity is more quantifiable, and when I have benefitted from the line movements on some of the teams I am currently playing, which should move favorable for me.

Re: Hedging
 

I focus mainly on football. In the other sports, I focus mainly on futures.

Why?

Because my strength is in analyzing the market and figuring out how to beat "derivative" markets by looking at the main market. By derivative markets, I mean futures, parlays, teasers, buying points, etc. My strength is NOT in handicapping individual games.

Football is different than the other sports because the distribution of the scores is so different. For example, a game is more likely to end by a difference of 3 points than any other number. This factor makes for some very interesting type of wagers. In baseball, there is the chance to look at the run-line, but that's pretty much it. In basketball, there's nothing like that. In hockey, there was the puck-line, but now with overtime, things have changed (even with the puck-line, I spent little time on hockey because I don't understand or follow the sport). But with the other sports, futures are possible for my skills, but more so when it comes down close to the end of the season.

I hope you get a chance to check my blog now and then.

Thanks,
King

Re: Hedging
 

the man ^^^^^^^^^^^