I think the major reason people do not comprehend why not to hedge the bet is that they are overbetting their bankroll, i.e. well above full Kelly. I think arguments along the lines of 'why take the risk?' and/or 'gambling is risky' are indicative of gross overbetting. It is wise to take the Giants on the ML only to the extent that you are betting above full Kelly.
To put it simply, you should 1) place a full Kelly bet based on the edge you have assuming an efficient market (relatively safe assumption in the NFL); and 2) place the rest of your bankroll on the both the Packers +100 and the Giants +400 guaranteeing a profit on that portion of the bankroll. It might be easier to comprehend for some if you think of it as two entirely different wagers in the aforementioned fashion.
I think the major reason people do not comprehend why not to hedge the bet is that they are overbetting their bankroll, i.e. well above full Kelly. I think arguments along the lines of 'why take the risk?' and/or 'gambling is risky' are indicative of gross overbetting. It is wise to take the Giants on the ML only to the extent that you are betting above full Kelly.
To put it simply, you should 1) place a full Kelly bet based on the edge you have assuming an efficient market (relatively safe assumption in the NFL); and 2) place the rest of your bankroll on the both the Packers +100 and the Giants +400 guaranteeing a profit on that portion of the bankroll. It might be easier to comprehend for some if you think of it as two entirely different wagers in the aforementioned fashion.
Solid post, but I would be careful with full Kelly.
AFAIK, full Kelly carries what most pros would consider an unacceptable risk of ruin (assuming you're using Stanford Wong's definition of bankroll, i.e. an amount that if depleted would cause you to quit betting forever), not to mention that determining your exact edge in sports betting is virtually impossible.
I'd echo what you wrote but use fractional Kelly (something like 1/4, but the exact fraction would depend on your personal risk preference).
As an aside, please contribute more often if you see fit.
Solid post, but I would be careful with full Kelly.
AFAIK, full Kelly carries what most pros would consider an unacceptable risk of ruin (assuming you're using Stanford Wong's definition of bankroll, i.e. an amount that if depleted would cause you to quit betting forever), not to mention that determining your exact edge in sports betting is virtually impossible.
I'd echo what you wrote but use fractional Kelly (something like 1/4, but the exact fraction would depend on your personal risk preference).
Completely agree about risk of ruin being too great with full Kelly based on that definition of the bankroll. I too would only recommend betting half Kelly or quarter Kelly normally, but was only suggesting a maximum theoretically acceptable bet of full Kelly in this particular instance.
Hey I've been wrong before and will be wrong again but I like the Giants in this game and I also like the 49ers to go to the Superbowl. But what do I know I'm leaving for work shortly.
I know its after the fact but I would have hedged some back and my thinking may be backwards and I know Im discounting vig but here goes.
If I hedge $250 at +400 then I either break even or win $750 if I dont then I either win $1000 or lose $1000. So therefore I am laying $1000 to win an EXTRA 250. If I hedge it is like the guy said to me I will pay you $750 if the Packers win or you pay me $1 if the Giants win. Which deal would you rather have?? And AGAIN, I know I am missing the long term EV and Kelly etc but this guy may only bet a few times with a co-worker like this and why get greedy for the extra $250 when you can TOTALLY eliminate a painful (I assume) loss? Just my .02 recreational take.
That's why I said to hedge. I hope the guy that took the Packers bet hedged....
Did you read anything in this thread? GB closed at like -8.5 and he got them at PK +100. If you still don't understand the reasons when to hedge and when not to hedge, you definitely made the right decision to quit gambling.
The result of one game in no way dictates the correct way to handle a general situation such as this.
Did you read anything in this thread? GB closed at like -8.5 and he got them at PK +100. If you still don't understand the reasons when to hedge and when not to hedge, you definitely made the right decision to quit gambling.
The result of one game in no way dictates the correct way to handle a general situation such as this.
I agree 1000% with the statement that the outcome in no way whatsover affected which decisions should have been made. My only point was that in a recreational type one off situation for substantial money like this and NOT a part of a managed portfolio of risks (whose goal is to maximize EV with as little risk of ruin as possible) I would have hedged all the risk out and still had a shot at a nice gain.
The distinction I am making I believe is not the mathematical soundness or long term EV of the decision but rather the nature of the wager which, if I remember your post on the subject correctly Goats, was one of the reasons to hedge. Also, a professional gambler and a recreational gambler are two VERY different animals. If one has a co-worker in the first place they are likely not a professional.
I agree 1000% with the statement that the outcome in no way whatsover affected which decisions should have been made. My only point was that in a recreational type one off situation for substantial money like this and NOT a part of a managed portfolio of risks (whose goal is to maximize EV with as little risk of ruin as possible) I would have hedged all the risk out and still had a shot at a nice gain.
The distinction I am making I believe is not the mathematical soundness or long term EV of the decision but rather the nature of the wager which, if I remember your post on the subject correctly Goats, was one of the reasons to hedge. Also, a professional gambler and a recreational gambler are two VERY different animals. If one has a co-worker in the first place they are likely not a professional.
Agree with everything you said. I was just trying not to make assumptions about the OP. He may not be a pro gambler, but he could easily be wealthy. He could have a 6-figure salary for all we know. Maybe $1000 isn't that substantial for him, maybe it is. If it's not, even if he's a recreational gambler, I don't think hedging is right for him from a mathematical standpoint.
In the end though, and I think I mentioned it somewhere (if not, I meant to), I don't begrudge recreational gamblers for doing whatever makes them happy, b/c after all, that's the definition of recreation. I (and others like yourself) just tried to share the math behind such a situation so he could make an informed decision.
Also, one last thing, my response before this one was mostly geared towards Rainman, who was using the "see, it lost, he should have hedged" argument, not your post which was perfectly reasonable IMO.
I think the Sticky should go back because and of course it's just my opinion and I've had countless arguments at work over this you should never hedge unless you are so over exposed on a game that it will seriously hurt your B/R. I watch guys time and time again make parlays using the Money night game with the sole purpose of betting the other side. I just don't get it. We bet everyday or at least just about everyday why would anyone look at short term results.
I also watch guys shop until they drop for future bets with the mindset that if they make the playoffs I can hedge. I not a future bet guy so I could be wrong but why would you shop for the best possible line and then kill it if you get lucky enough to make the playoffs.
Agree with everything you said. I was just trying not to make assumptions about the OP. He may not be a pro gambler, but he could easily be wealthy. He could have a 6-figure salary for all we know. Maybe $1000 isn't that substantial for him, maybe it is. If it's not, even if he's a recreational gambler, I don't think hedging is right for him from a mathematical standpoint.
In the end though, and I think I mentioned it somewhere (if not, I meant to), I don't begrudge recreational gamblers for doing whatever makes them happy, b/c after all, that's the definition of recreation. I (and others like yourself) just tried to share the math behind such a situation so he could make an informed decision.
Also, one last thing, my response before this one was mostly geared towards Rainman, who was using the "see, it lost, he should have hedged" argument, not your post which was perfectly reasonable IMO.
Both Goats and bkeiller touch on another aspect that goes into hedging which are the psychological aspects of a loss. It has nothing to do with the math of the situation which using the Packers game clearly calls for not hedging. Lets take the same recreational gambler who can afford the $1000 but if it loses, rather than chalk it up to one of those things doesn't take the same bet in the future or goes on tilt and bets recklessly trying to win it back. In that case I would agree with the guy hedging. Now I realize someone who would be prone to such behavior will never be able to do this professionally but that is also why there are very few people who can do this professionally. Its very hard to take emotion out of the equation. Look at all the "Bad Beat" threads. Its better to recognize you are capable of irrational behavior and take steps to limit the damage.
I agree 1000% with the statement that the outcome in no way whatsover affected which decisions should have been made. My only point was that in a recreational type one off situation for substantial money like this and NOT a part of a managed portfolio of risks (whose goal is to maximize EV with as little risk of ruin as possible) I would have hedged all the risk out and still had a shot at a nice gain.
The distinction I am making I believe is not the mathematical soundness or long term EV of the decision but rather the nature of the wager which, if I remember your post on the subject correctly Goats, was one of the reasons to hedge. Also, a professional gambler and a recreational gambler are two VERY different animals. If one has a co-worker in the first place they are likely not a professional.
That's what I was sayin, but less eloquently of course.
It's not like those +EV bets are available often, so who knows when ya would ever do another like this situation. So I would have hedged... No risk, no worries, no stress, guaranteed to not lose money and possibly gain some.
Sorry if it's not "smart", but it sure seemed like the smartest thing to me.
True because I believe the discussion has no right or wrong. EVERY individual is different in their circumstances, risk tolerances etc so that what may be an irrational decision for one is a very rational one for another. One of the values I believe of the board is throwing out a question like the OP did to see what others may do in a similar situation, to learn what your options are and where there may be advantages or disadvantages to a particular course of action.
True because I believe the discussion has no right or wrong. EVERY individual is different in their circumstances, risk tolerances etc so that what may be an irrational decision for one is a very rational one for another. One of the values I believe of the board is throwing out a question like the OP did to see what others may do in a similar situation, to learn what your options are and where there may be advantages or disadvantages to a particular course of action.
From a statistical standpoint, there is clearly a correct answer, however it seems that some are averse to risk and thus don't take the best mathamatical approach (which makes me wonder why you'd gamble in the first place). I think that fact that some would take the $45 in my coin flip example just demonstrates that point. As goats said, it's everyone's own money so they can do with it as they please. However I'd personally like to create the biggest advantage for myself that I can in pretty much any situation.
From a statistical standpoint, there is clearly a correct answer, however it seems that some are averse to risk and thus don't take the best mathamatical approach (which makes me wonder why you'd gamble in the first place). I think that fact that some would take the $45 in my coin flip example just demonstrates that point. As goats said, it's everyone's own money so they can do with it as they please. However I'd personally like to create the biggest advantage for myself that I can in pretty much any situation.
I hear you loud and clear Tommy and I think we are all in agreement that in the long run you should try to maximize EV and even as a recreational guy thats what I try to do but sometimes it is best to minimize the risk of the unknown for certainty and emotionally and financially that has value. Look no further than the people buying short term US treasuries right now with negative real rates of return.
What if I changed your coin flip example to $1 Billion and $450 million? I bet almost everyone on the board would take the cash. Again, I think we are differing on psychology not math.
Finally, as a recreational guy, I will bet the Super Bowl whether I have a +EV bet or not cause its fun for me to do it. Do I realize that the odds (the vig) are against me, of course, but I will still do it and that's probably what separates me from the professionals to who it is just another game. Not trying at all to be argumentative with you guys and think we are all agreeing on the math aspects just trying to provide a different perspective.
What if I changed your coin flip example to $1 Billion and $450 million? I bet almost everyone on the board would take the cash. Again, I think we are differing on psychology not math.
Interestingly enough, in the hedge post I made that used to be stickied, I specifically mentioned the case of standing to win a life-altering amount of money (i.e. in a contest or game show) as a reason to hedge. So yes, there is psychology involved, even for someone seeking to maximize their EV, but for pros/serious bettors, it usually only comes into play when the amount is truly life-altering.
Comments
To put it simply, you should 1) place a full Kelly bet based on the edge you have assuming an efficient market (relatively safe assumption in the NFL); and 2) place the rest of your bankroll on the both the Packers +100 and the Giants +400 guaranteeing a profit on that portion of the bankroll. It might be easier to comprehend for some if you think of it as two entirely different wagers in the aforementioned fashion.
Solid post, but I would be careful with full Kelly.
AFAIK, full Kelly carries what most pros would consider an unacceptable risk of ruin (assuming you're using Stanford Wong's definition of bankroll, i.e. an amount that if depleted would cause you to quit betting forever), not to mention that determining your exact edge in sports betting is virtually impossible.
I'd echo what you wrote but use fractional Kelly (something like 1/4, but the exact fraction would depend on your personal risk preference).
As an aside, please contribute more often if you see fit.
Read the first post. The OP's co-worker made him the offer.
Sorry lol. I was confused as hell. I got it now
Completely agree about risk of ruin being too great with full Kelly based on that definition of the bankroll. I too would only recommend betting half Kelly or quarter Kelly normally, but was only suggesting a maximum theoretically acceptable bet of full Kelly in this particular instance.
Will do...
Nice call, O-T
Very nice call OT.
I know its after the fact but I would have hedged some back and my thinking may be backwards and I know Im discounting vig but here goes.
If I hedge $250 at +400 then I either break even or win $750 if I dont then I either win $1000 or lose $1000. So therefore I am laying $1000 to win an EXTRA 250. If I hedge it is like the guy said to me I will pay you $750 if the Packers win or you pay me $1 if the Giants win. Which deal would you rather have?? And AGAIN, I know I am missing the long term EV and Kelly etc but this guy may only bet a few times with a co-worker like this and why get greedy for the extra $250 when you can TOTALLY eliminate a painful (I assume) loss? Just my .02 recreational take.
Did you read anything in this thread? GB closed at like -8.5 and he got them at PK +100. If you still don't understand the reasons when to hedge and when not to hedge, you definitely made the right decision to quit gambling.
The result of one game in no way dictates the correct way to handle a general situation such as this.
I agree 1000% with the statement that the outcome in no way whatsover affected which decisions should have been made. My only point was that in a recreational type one off situation for substantial money like this and NOT a part of a managed portfolio of risks (whose goal is to maximize EV with as little risk of ruin as possible) I would have hedged all the risk out and still had a shot at a nice gain.
The distinction I am making I believe is not the mathematical soundness or long term EV of the decision but rather the nature of the wager which, if I remember your post on the subject correctly Goats, was one of the reasons to hedge. Also, a professional gambler and a recreational gambler are two VERY different animals. If one has a co-worker in the first place they are likely not a professional.
Agree with everything you said. I was just trying not to make assumptions about the OP. He may not be a pro gambler, but he could easily be wealthy. He could have a 6-figure salary for all we know. Maybe $1000 isn't that substantial for him, maybe it is. If it's not, even if he's a recreational gambler, I don't think hedging is right for him from a mathematical standpoint.
In the end though, and I think I mentioned it somewhere (if not, I meant to), I don't begrudge recreational gamblers for doing whatever makes them happy, b/c after all, that's the definition of recreation. I (and others like yourself) just tried to share the math behind such a situation so he could make an informed decision.
Also, one last thing, my response before this one was mostly geared towards Rainman, who was using the "see, it lost, he should have hedged" argument, not your post which was perfectly reasonable IMO.
I also watch guys shop until they drop for future bets with the mindset that if they make the playoffs I can hedge. I not a future bet guy so I could be wrong but why would you shop for the best possible line and then kill it if you get lucky enough to make the playoffs.
Both Goats and bkeiller touch on another aspect that goes into hedging which are the psychological aspects of a loss. It has nothing to do with the math of the situation which using the Packers game clearly calls for not hedging. Lets take the same recreational gambler who can afford the $1000 but if it loses, rather than chalk it up to one of those things doesn't take the same bet in the future or goes on tilt and bets recklessly trying to win it back. In that case I would agree with the guy hedging. Now I realize someone who would be prone to such behavior will never be able to do this professionally but that is also why there are very few people who can do this professionally. Its very hard to take emotion out of the equation. Look at all the "Bad Beat" threads. Its better to recognize you are capable of irrational behavior and take steps to limit the damage.
That's what I was sayin, but less eloquently of course.
It's not like those +EV bets are available often, so who knows when ya would ever do another like this situation. So I would have hedged... No risk, no worries, no stress, guaranteed to not lose money and possibly gain some.
Sorry if it's not "smart", but it sure seemed like the smartest thing to me.
True because I believe the discussion has no right or wrong. EVERY individual is different in their circumstances, risk tolerances etc so that what may be an irrational decision for one is a very rational one for another. One of the values I believe of the board is throwing out a question like the OP did to see what others may do in a similar situation, to learn what your options are and where there may be advantages or disadvantages to a particular course of action.
From a statistical standpoint, there is clearly a correct answer, however it seems that some are averse to risk and thus don't take the best mathamatical approach (which makes me wonder why you'd gamble in the first place). I think that fact that some would take the $45 in my coin flip example just demonstrates that point. As goats said, it's everyone's own money so they can do with it as they please. However I'd personally like to create the biggest advantage for myself that I can in pretty much any situation.
I hear you loud and clear Tommy and I think we are all in agreement that in the long run you should try to maximize EV and even as a recreational guy thats what I try to do but sometimes it is best to minimize the risk of the unknown for certainty and emotionally and financially that has value. Look no further than the people buying short term US treasuries right now with negative real rates of return.
What if I changed your coin flip example to $1 Billion and $450 million? I bet almost everyone on the board would take the cash. Again, I think we are differing on psychology not math.
Finally, as a recreational guy, I will bet the Super Bowl whether I have a +EV bet or not cause its fun for me to do it. Do I realize that the odds (the vig) are against me, of course, but I will still do it and that's probably what separates me from the professionals to who it is just another game. Not trying at all to be argumentative with you guys and think we are all agreeing on the math aspects just trying to provide a different perspective.
Interestingly enough, in the hedge post I made that used to be stickied, I specifically mentioned the case of standing to win a life-altering amount of money (i.e. in a contest or game show) as a reason to hedge. So yes, there is psychology involved, even for someone seeking to maximize their EV, but for pros/serious bettors, it usually only comes into play when the amount is truly life-altering.