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

[Black Aces 518]

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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.

[20Five]

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.

[llabb]

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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.
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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.

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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.

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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?

[King Yao]

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.

[Black Aces 518]

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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.

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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?

[llabb]

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.

[King Yao]

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

[sublime]

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