Good Gooder Goodest

[michaelg2708]

lets say i am trading a horse race. the horse is at 3.0 so i back it. The horse then comes in to 2.0 and is at 2.0 at the start of the race. i have 3 options. am i right in saying this?

GOOD - i green up and spread my profit across every horse
GOODER - i lay using the same amount as my back bet meaning i win only if that horse wins
GOODEST - i just let the original back bet run as this is value and any other bet i do to hedge my bets is not value

as long as i can put up with variance in the long run the 3rd option is best because every lay bet after that is taking away value from my original bet?

[MemphisFlash]

your right, but i would say goodest is green out before race starts. always remove liabilty if possible, protect your balance.

[jamesedwards]

Greening is a balancing act depending on your specific circumstances. It depends on the expected value of all types of your trades, and any bank constraints you are working with.

From a purely profit perspective then you are best off trading as much and often as you can when you have a positive expected value (+EV), and as little as you can without. Often the greening element of a trade is not +EV and so should be avoided as much as possible to maximise ROI.

But, without greening you end up with swings in profitability and a long negative swing might risk your bank. And in today's nanny state you risk not being able to replenish your funds as you might need, even if you can afford to do so.

I imagine most people will green because of the comfort and protection it provides. You're essentially paying back a little bit of your profit as insurance against a losing swing. Personally, I stopped greening some time ago, instead keeping a big enough bank to cover losing swings. I do still green occasionally but usually only because I consider the closing trade to be +EV.

[Euler]

Hedging always allows you to scale quickly and efficiently and reduces variance. If you don't hedge, you have reintroduced an element of risk.

I won £3k fully hedged on the Grand National; it would have been much more unhedged, but I wouldn't have picked the winner. It would take 30 years, maybe, for that to balance out and be worth it!

[csewell1987]

When we say green up only at +EV is this just pivoting around our tissue price? So for example, we believe a horse is a fair 5/1 shot but we get 7/1 for it. If the horse were to contract to 4/1 then we have +EV on the lay side now so green up. If the horse still contracts but only to 6/1 do we leave this to run?

[Trader724]

When to Hedge (Cash Out / Trade Out):

If your original bet doesn't look like a long-term winner: Maybe the odds weren't great, or the commission is too high. If you let it run, you'd likely lose money on average. If you can hedge now and guarantee any profit (even a small one). It's better than an expected loss. You're basically salvaging the situation.

If you prefer safety NOW: Even if your bet might be profitable long-term, maybe you don't want to risk losing right now. Or perhaps you're happy with the guaranteed profit you can lock in immediately. If you prefer a sure thing, even if it's smaller, over risking it for potentially more, then hedge. It's about wanting security.

When NOT to Hedge (Let it Ride):

If you're convinced your original bet is very good value: You strongly believe you got great odds and that, on average, you'll win significantly more by letting it finish compared to the small profit hedging offers you right now.

If you're OK with the risk: You're willing to accept the possibility of losing your stake on this specific bet for the chance of that bigger average win over the long term. Your priority is maximizing potential profit, not necessarily immediate safety.

In short: Hedge if the bet looks bad long-term, or if you want safety. Don't hedge if the bet looks really good long-term, and you're willing to accept the risk for a potentially bigger average win.

[Tuco]

Hedging always allows you to scale quickly and efficiently and reduces variance. If you don't hedge, you have reintroduced an element of risk.

I won £3k fully hedged on the Grand National; it would have been much more unhedged, but I wouldn't have picked the winner. It would take 30 years, maybe, for that to balance out and be worth it!

...this is precisely why we need to be able to scale out with ongoing greening:

Ladder Green Up 'Percentage' Box
viewtopic.php?t=28213

and

'Trade Closure P & L' (current odds) column AND 'Trade Closure P & L' (reverse odds) column
viewtopic.php?t=21562

and

In-play Trader
viewtopic.php?t=23176

[jamesedwards]

When we say green up only at +EV is this just pivoting around our tissue price? So for example, we believe a horse is a fair 5/1 shot but we get 7/1 for it. If the horse were to contract to 4/1 then we have +EV on the lay side now so green up. If the horse still contracts but only to 6/1 do we leave this to run?

If a horse is actually a fair 5/1 and you get 7/1 then that's +EV.

If the horse tightens into 11/2 and you green up that would be -EV. You would be giving back a bit of value in return for an all-green position.

But if the horse tightens into 9/2 and you green up that would be +EV.


Personally I look at every trade like this in isolation in order to maximise long term profitability. The upside is greater ROI, the downside is exposure to potential volatility.

[ShaunWhite]

Hedging at bsp is 0ev.
Hedging at any other time with an offer and it's fractionally positive, but if you cross the spread to do it it's fractionally negative. The markets exhibit EMH tenancies so the time shouldn't matter. Hedging reduces you're overall commission, but if you don't care about varience and want to generate discount points or commission then that might not be so clear cut.

Short answer : It depends.

[Trader724]

When to Hedge (Cash Out / Trade Out):

If your original bet doesn't look like a long-term winner: Maybe the odds weren't great, or the commission is too high. If you let it run, you'd likely lose money on average. If you can hedge now and guarantee any profit (even a small one). It's better than an expected loss. You're basically salvaging the situation.

If you prefer safety NOW: Even if your bet might be profitable long-term, maybe you don't want to risk losing right now. Or perhaps you're happy with the guaranteed profit you can lock in immediately. If you prefer a sure thing, even if it's smaller, over risking it for potentially more, then hedge. It's about wanting security.

When NOT to Hedge (Let it Ride):

If you're convinced your original bet is very good value: You strongly believe you got great odds and that, on average, you'll win significantly more by letting it finish compared to the small profit hedging offers you right now.

If you're OK with the risk: You're willing to accept the possibility of losing your stake on this specific bet for the chance of that bigger average win over the long term. Your priority is maximizing potential profit, not necessarily immediate safety.

In short: Hedge if the bet looks bad long-term, or if you want safety. Don't hedge if the bet looks really good long-term, and you're willing to accept the risk for a potentially bigger average win.

A mathematical framework for deciding whether or not to hedge a back bet

Variables:
O: Your Back Odds
p: Your estimated True Probability of Winning (maybe late LTP, BSP)
c: Commission rate (decimal)
S: Your Stake
Profit_HedgeNet: The guaranteed net profit available from hedging now (assumed > 0)
p_min: The minimum probability needed for your original bet to have non-negative EV.
p_min = 1 / ((O - 1) * (1 - c) + 1)
EV_NoHedge: The Expected Value of your bet if you don't hedge.
EV_NoHedge = S * [ p * (O - 1) * (1 - c) - (1 - p) ]

When to Hedge:

If your original bet has negative or zero Expected Value (EV_NoHedge <= 0).
   Condition: p <= p_min
   (Hedging gives a positive outcome (Profit_HedgeNet) instead of an expected non-positive one).
If you prioritize eliminating risk, even if EV_NoHedge > 0.
   Condition: This is a subjective choice based on risk tolerance, not just a formula. You choose the certain Profit_HedgeNet over the potentially higher but uncertain EV_NoHedge.

When NOT to Hedge (to Maximize Expected Value):

If your original bet has positive Expected Value (EV_NoHedge > 0) AND this value is greater than the guaranteed hedge profit, AND you accept the risk.
Condition: p > p_min AND EV_NoHedge > Profit_HedgeNet
(Substituting the formulas):
p > (1 / ((O - 1) * (1 - c) + 1)) AND S * [ p * (O - 1) * (1 - c) - (1 - p) ] > Profit_HedgeNet
(AND you are comfortable with the variance/risk involved).