In online sports betting, to hedge means to make a bet or a series of bets that take the opposite site of your original position in order to reduce the risk involved or lock in some profit. The most common techniques of hedging are to conserve, diversify, and to randomize.
Hedging is widely believed to be extremely conservative, but many people rely on it to keep a broad investment portfolio and minimize the impact of variance.
Let’s say you already bet your money on Team A winning its next American Football match, but the quarterback is injured right before the game and your confidence now lies with its opponents, Team B. In that situation, you could play conservatively and hedge by placing a bet on Team B, which would diversify your portfolio and helping you minimize your potential losses.
R.H. Kaplan and W.S. Cooper were among the first to study the concept of randomization and so-called “adaptive coin-flipping” as an evolutionary strategy. To make a long story short, their conclusion was that our judgment tends to be imperfect at times, which means that shaking things up and doing the opposite of what you would normally choose from time to time might result in a surprisingly positive outcome.