Stuckey: How to Hedge Longshot Futures and My Plan for Auburn

"Hey Stuck, how should I hedge my future?"

The question I get more than any other from recreational bettors on social media and in real life.

There's nothing wrong with the question, but it's almost impossible for me to answer in broad terms. It's similar to asking a financial advisor how to invest your money without sharing any other details.

Hedging a future depends on so many factors, starting with this one — is it even possible?

I see too many people wanting to hedge way too early. It's best to show an example to illustrate my point here.

Is Hedging Mathematically Possible?

Let's say you had a 50-1 future on Auburn and wanted to hedge some of the risk before the Tigers' Sweet 16 matchup against North Carolina. We will assume you bet $100 on this future to make the numbers easy, so you have a $100 to win $5,000 ticket.

We'll also assume Auburn would be about a five-point underdog for the rest of its four potential games. That would make every opponent roughly -200 on the moneyline (a fair assumption).

A 50-1 future in the Sweet 16 sounds nice, and many think they can profit off of it. But let's look at the math, assuming you wanted to guarantee a profit of $100 no matter what happens.

Sweet 16: Bet $400 to win $200 on UNC moneyline 

If UNC would have won, you would have accomplished your goal of profiting $100 (accounting for your original $100 futures wager). However, Auburn advanced once again.

As a result, you need to bet the following on Kentucky to simply profit $100:

Elite 8: Bet $1,200 to win $600 on Kentucky moneyline

Again, if Kentucky would have won, you would have walked away with a net $100, but Auburn found a way in overtime. You have now lost a total of $1,600 in hedge attempts. If you still wanted to chase that $100 profit, you'd have to make the following bet in the Final 4:

Final 4: Bet $3,600 to win $1,800 on Virginia moneyline

If Virginia wins, you walk away with your $100. However, if Auburn pulls off another upset, you are stuck. You have now lost $5,200 in incorrect hedge attempts (and actually more since UVA ML is higher than -200).

Your best case scenario is to now hope Auburn wins the national championship so you can only lose -$200 ($5,200-$5,000). And if Auburn loses the national championship, you lose $5,300 by simply trying to profit $100 with four games to go on a $100, 50-1 future.

The hedging adds up quickly, so you have to be careful and plan ahead carefully. Before you even think about hedging a future, you need to project the hardest possible path for a team to get the implied moneyline odds. If you don't set your own numbers, you can use ours or triangulate them yourself (look at past lines of similar opponents in recent games to get a ballpark, although this can be a less accurate approach).

If you don't want to go through all of that work, I have three basic guidelines to follow (that can vary based on the specific circumstance but are good rules of thumb).

Hedging Futures Guidelines

• Never hedge a future with 30-1 or less odds until the championship
• Don't hedge a future between odds of 30-1 and 50-1 until the Final Four
• Wait until the Elite 8 to think about hedging a future between 50-1 and 100-1

Hedging Factors

If you do determine that it is actually possible to hedge at a specific point in time, the decision then comes down to your objective and personal risk aversion level.

There are all kinds of variables that determine your risk aversion level. You may be completely risk-loving  (let it ride) or extremely risk-averse (perfectly content locking in the most profit no matter what) — but more than likely, you will fall somewhere in between.

Will it ruin your month if you get nothing out of the future, potentially sending you on tilt? If so, you should probably hedge. If it won't and your original intent was to throw a dart at a long shot, in most cases, you should let it ride.

Ask yourself what your original goal of the future was: to take a shot or to get to a certain point and lock in profit? That should help influence your hedging decision.

The potential matchups matter, your gut can play a role, and many other factors that will depend on each unique future and bettor play a part.

My Auburn Futures

As many of you might already know, I have three bets on Auburn to win the national title that I bet at different times throughout the season in our quest to repeat as futures national champs after hitting Villanova 30-1 last year.

1. 45-1 preseason
2. 54-1 midseason
3. 95-1 midseason

I bet each for a half unit, which we will assume is $100 for ease of explaining my plan of attack.

Future Number 1: Auburn 45-1

Per my own personal guidelines, I did not even think about hedging this particular preseason future. That gives me some flexibility.

I initially planned on letting this one ride, but I'm going to take a small shot at a potential middle by betting  Virginia +150 to win the national championship for $300 to win $450. If Auburn beats Virginia, I will simply place a moneyline wager on Auburn's national title opponent to win that $300 back. For this exercise, let's assume it's a $600 wager to win $300 on Michigan State at -200.

But a Virginia win will give me a chance at a potential risk-free middle if Texas Tech beats Michigan State, as UVA would be favored by a few points. I would simply place a bet on Texas Tech +3.5 to win $300 and hope Virginia wins by 1-3 points.

The Cavaliers should also be a very small favorite over Michigan State, but I would likely just close out that position with Sparty moneyline at +110 for free profit regardless of outcome.

• Auburn loses in Final Four: -$100 (plus free roll middle shot)
• Auburn loses in title game: -$100
• Auburn wins championship: +$3600

Note: I am only doing this because I have other Auburn futures and positions that I will detail next. If I just had Auburn 45-1, I'd probably let it ride until the national championship.

Future Number 2: Auburn 54-1

I actually bet Kentucky moneyline ($200 to win $100) in the Elite 8 to ensure I would break even on this position. I likely wouldn't have done so if Chuma Okeke didn't get hurt, but I really didn't know what to expect without him.

My goal hasn't changed with this specific future: I want to break even if Auburn doesn't win it all. Consequently, I placed a bet for $750 to win $300 on Virginia moneyline against Auburn on Saturday. If Virginia wins, I will break even.

If Auburn wins, I will place another bet on Auburn's opponent in the title game to make sure I come out net zero if Auburn loses. Let's assume once again that Michigan State wins and would be -200 in the national title. That would require me to bet $2300 on the Spartans to win on Monday.

If Auburn wins it all, I'd profit $2150 ($5400-$200-$750-$2300). And if Auburn loses in either of the two remaining games, I'd break even.

• Auburn loses in Final Four: $0
• Auburn loses in title game: $0
• Auburn wins championship: +$2150

Future Number 3: Auburn 95-1

This was the big boy that I wanted to guarantee a small $100 profit on in the Elite 8 with a $400 to win $200 bet on Kentucky moneyline. Since Auburn won, I'm down -$400 on this position.

I now want to hedge this future to guarantee the most amount of profit regardless of what happens.

In order to perfectly hedge this $100 to win $9,500 on Auburn winning the national title, I can bet $8,700 on Auburn NOT to win the national title (-870) to win $1,000. If Auburn wins it all, I would only profit $400 after subtracting this hedge and the previous $400 UK moneyline bet. However, I'd be more than content with the profit from the other two Auburn futures.

And if Auburn doesn't win the national title, I'd profit $500 after accounting for my $100 original future and the $400 Kentucky bet.

• Auburn loses in Final Four: +$500
• Auburn loses in title game: +$500
• Auburn wins championship: +$400

Futures Summary

Remember that $100 was equivalent to a half unit for me in this exercise, which means I won't walk away with less than two full units overall with an upside of over 30 units if Auburn wins it all.

*Would also have Virginia +150 national title future free roll/middle shot

If this all seemed fairly complex, I've accomplished my goal. Hedging futures isn't easy nor is just locking in a small profit. I hope these three different approaches at least helped you think more critically about how you might approach hedging in the future.

Your first instinct might be to take the opponent (UVA in this case) to win the national title and then deal with that bet later if that team advances. However, that can put you in a losing position. Make sure you plan ahead properly. As I illustrated earlier, the hedging adds up quick with each game and you may not even be able to get that much down.

There is no science, as the right answer will differ for every person for each unique future. And when in doubt, just hold on to your future.

My goal for this particular weekend is to lock in a small profit no matter what happens while maintaining risk-free upside on a team I've believed in throughout the entire season.

Go Tigers.