Appreciate any thoughts.
Is there a secondary market for a sports bet e.g. before the season I bet that a particular team would win the Super Bowl and the odds were 40:1. Now assume that team has reached the division final and the "odds" of them winning the Super Bowl is 10:1. Is there a way for me to realize my gain by selling my bet back or hedge it so that I can lock in a gain? If there is not (I don't know of one) then why isn't there?
Appreciate any thoughts.
I don't know of one and my guess would be because one there would not be enough action to justify it and two it would be hard for anyone to profit on it.
Lets say you bet $10 at 40-1, and there are 4 teams left. For sake of smplicity, lets say you have a 1 in 4 chance of winning $400 and a 3 in 4 chance of losing $10. You could bet $100 on your opponent in the division round. If your opponent won, you would win ~$100 but lose your $10 for a total win of $90. In this scenario, you're all done. If your opponent lost, you would be down $100 but continuing on. Now, bet $200 on the super bowl. If the opponent won, you would win $200, minus the $110 you bet for a win of $90 again. If your original pick won, you would win $400, minus your $300 in losses for a win of $100.
In this case, you have a guaranteed win that closely matches your original expected value before the hedge bets. But I did not account for the vig, and in the cases of hedging it will always eat into your EV.
Obviously money lines are not going to be exactly 1:1 but you get the idea. You would have to manipulate the bet amount to account for anything but the most evenly matched games.
This works better if you only have one game to hedge (ie. the super bowl). But hedges are in general a bad idea unless there is a very large (life changing) sum of money at stake.
EDIT: I see you said division finals, not conference finals - This adds an extra round and your payout will be smaller. In this case a hedge is really going to eat in to your EV and it is far better to gamble one game more until you at least reach the conference finals before hedging(but preferably the super bowl or not at all).
But hedges are in general a bad idea unless there is a very large (life changing) sum of money at stake.
I tend to disagree with that statement. I understand why people belive that, but personally, I'd rather lay off some of the odds. In fact, I make a living "hedging" equities.
If the payout is 40x or 0, I'd rather be assured of 20x. Lots of small +EV situations are preferable to me. In fact, that is exactly what a sports book does. It hedges, collecting the vig.
I agree that the vig can eat up the profits, but even though it is gambling, I don't think locking in a + can be considered a bad idea. At least not for me.
Years ago in grad school I was in a blind draw NCAA pool, I got Duke as my team, when they were the consensus #1. I sold my ticket for 15x what I paid before the first game started. It got sold again in the final four round. A real futures market developed. Real life MBA at the time.
Does anyone know if a sports book could (legally) offer to buy bets back and if so do you agree that the reason that they do not is because volume would be too low to justify it and/or they can't lay off the risk?