Re: Simulation results Thursday
Did you see Culver's post where he hedged out of the Cleveland series bet by taking a smaller one on Boston at 4-1 prior to last night's game? I know it's too late for that now, just wondering what your stand is on hedging. Thanks.:cheers
Hedging is an interesting question/problem. I do it, and hate it. It seems that is costs me more money than it makes me. But, I still do it, and do it poorly.
It is an interesting anlaysis though. Take your example. I did consider taking a position on Boston two days ago at +400. Would have been a good hedge in that I could have guaranteed about a 60% return on my initial position (as opposed to an expected 15% when I took the position). Seems like an obvious choice.
But, Boston would have to win 3 games in a row to make the second position a good one. To do this, they would have to have a slightly over 60% chance to win each game. Now, it doesn't seem like such a good idea.
Now that I think about it, you could classify hedges in two groups. Those that occur before the contest (or in this case series) starts. Effectively, you are scalping. That probably would be a good idea. If you remain on one side, then you have an expected return of some number, say +1.05. On the other hand, if you scalp, then your expected return is infinite, since you aren't risking anything. But the actual return is obviously much smaller than if you stick with one side and win.
The answer to this dilema is probably obvious to guys with more experience, but it isn't to me. I suppose I could build a simualtion modeland test different scenerios, and I might do that. (I once did this with craps, trying to figure out if I had a $100, what was the best way to bet to give me the highest expected return. Turns out, it was put a $100 on the table and throw the dice once, then walk away. That became obvious after I saw the results.)
The other type is hedging during a contest or series. The fact that a hedge exists, implies the contest is going your way and your chances of winning are better than they were when you started. Now, assuming you did good work in handicapping the contest, and that work seems to be proving out, it probably does not make sense to hedge.
But here is where I fail, I do. Like yesterday, I liked both Purdue and Indiana to cover. Since they were both on TV, I took those sides. But at halftime, I hedged both. In the Indiana case, after watching the first half, I judged the first conclusion as probably being bad and wanted to cover my ass. In the Purdue case, I hedged to create a potential middle situation. Alas, both were mistakes, my initial positions were winner, but I gave away most of the profit.
So inconclusion, I guess I think it's a bad idea. But I do it, and will continue to do it. That's why I tell people gambling is ievil. It makes you hate yourself in the morning.
