Two weeks ago, I suggested betting on the Patriots to win the AFC at 2/3 odds. Now, with the Pats hosting the Steelers in the AFC Championship as six-point favorites this coming Sunday, the price is around 5/12. In other words, the value that I saw coming arrived right on schedule, mostly thanks to an incredibly easy road to the Conference Championship Game.
To make the math straightforward, let’s say you wagered $1,000 on New England to win the AFC at even money. What should you do now? Here are a few options.
There is an opportunity to lock in your profit by betting on Pittsburgh as a 2/1 underdog. If you bet $333 on the Pittsburgh moneyline and the Steelers win, you pocket $666. If New England wins the game, you lose your $333 wager on Pittsburgh, but collect the remaining $667 on the initial $1,000 bet. This strategy takes all risk out of the AFC Championship Game. You don’t even have to watch. Regardless of the result, you make a nice profit.
This is the play if you think the Patriots have a good (but not great) chance of winning and want some protection if they lose. There are several ways you can go about making a partial hedge. The easiest is to bet an amount smaller than $333 on the Steeler moneyline. For instance, if you bet $150 on Pittsburgh and New England wins, your $1,000 profit drops to $850 because of the hedge. However, if the Steelers win, instead of losing everything, you get $300 back.
Another strategy is to try to win twice by betting on Pittsburgh +6. If the Patriots win the game, but the Steelers cover, you win both bets. If the Patriots crush Pittsburgh, you lose your hedge, but win the initial bet. If the Steelers win the game, you cover the spread and cash the hedge ticket.
So if you bet $330 on Pittsburgh +6 at -110 and the Patriots win the game 24-20, you cash your original $1,000 ticket plus the hedge, and end up with a $1,300 profit. If the Patriots win 31-20, you win the original bet but lose the hedge, and wind up $670 ahead. If the Steelers win by any score, you lose $1,000 on the initial wager, but get $300 back from your hedge.
Of course, you can also combine the partial hedges discussed above.
Let it Ride
Hedges work when you don’t have extreme confidence in your pick and want to minimize your risk. However, if you feel strongly that the Pats are going to win, then why hedge? You are 60 minutes from cashing your full wager. Don’t cut into your potential profits unless you have some reason to back down from your initial assessment.
If you originally bet on the Patriots because you thought they were the best team, what has changed your mind? You have a six-point favorite at even money, and that is an enviable spot to be in.
On the flip side, if you made the wager because you saw the future and recognized you were getting value, then a hedge makes sense. There is nothing wrong with playing it part way, it just depends on your individual confidence and risk tolerance.
Photo credit: Keith Allison (flickr) [https://creativecommons.org/licenses/by-sa/2.0/]