How to Hedge Your Cavs Bet For Game 7

There are some of you out there that have a futures ticket that will be decided tonight.  The Warriors and Cavaliers were at the top of the futures board all season long so you might not have a huge payday coming, but there is still a question about hedging.  Should you hedge at all?  Should you let it ride?  Rather than making a gut call, it’s better to let the math decide.

Let’s start with the Cavaliers.  Maybe you took them after they were down 3-1 in the Finals and have them around 10 to 1 to win now.  Let’s take a look at how the math works out.  If you are having terrible flashbacks to algebra class, look away now.

x = money bet on Cleveland
y = payout if Cleveland wins
z = money to bet on Golden State moneyline tonight

We are going to make an assumption that the current moneyline is accurate and thus give the Warriors a 65% chance of winning tonight.  The idea here is that you set the two possible outcomes equal to each other so you end up with this equation:

.35 (y – z) = .65 (z/2 – x)

In common terms, there is a 35% chance that you win your Cavs payout minus what you bet to hedge tonight (left side of the equation).  There is a 65% chance that your payout is what you win on the Warriors moneyline minus what you have bet on the Cavs.

The equation above simplifies into this:

z = (.35*y + .65*x) / .68

Let’s say you bet \$100 when the Cavs were 10 to 1.  So x = 100 and y = 1000 in this scenario.  Plug those in:

z = (.35*1000 + .65*100) / .68

z = 610

In this instance, you would bet \$610 on the Warriors moneyline tonight to hedge your bet and lock in a profit.  You can use the bold equation above for your specific situation.  Remember that x is your bet on the Cavs and that y is your payout if the Cavaliers win.  Another reminder that this equation is meant to lock in a profit either way.  You always have the option to gamble and let it ride as well.  That decision is still up to you.

UPDATE:

Since not everyone has the same Warriors moneyline, here is a different version where you can plug in the exact line you are getting.  In this case, a = Warriors moneyline that you are getting as a positive number.  If you are getting Warriors -185, set a = 185.

z = (.35*y + .65*x) / (.35 + 65/a)

You can also alter the win percentages for each team.  For example, if you think (or calculate) the Cavs have a 40% chance of winning, Then it would be z = (.4*y +.6*y) / (.4 + 6/a).

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