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Best of Alan Krigman
The Experts Hedge on Wall Street, Why not at the Casino?10 April 2001
Casino gambling hedges are most common at craps. An example would be $2 "any craps" to cover $15 on the Pass Line during come-out rolls. The former would pay $14 on a two, three, or 12 -- just the bets the latter lose. The trouble is that craps bets used this way have high edges and therefore raise net house advantage.
Roulette players can also hedge. And, they can do it without increasing the house advantage. In fact, in double-zero games where even-money outside bets lose only half when the ball stops in 0 or 00, hedging with these wagers lowers the overall edge.
The practical effects of hedging go well beyond edge, however. To illustrate, consider a typical hedge at single-zero roulette:
In both cases, the house edge is 2.7 percent. Where the options differ, on a spin-by-spin basis, is in the chances and amounts.
Two somewhat contradictory factors can be considered. First is the likelihood that players betting fixed fractions of their bankrolls in each round will survive the normal downswings of a game for some specified number of spins. Second is the prospect that, the number of spins notwithstanding, bettors will hit some win peak before losing their stakes.
Suppose, as a representative situation, players bet five percent of their stakes per spin -- for instance a total of $10 starting with $200. Also assume they want to survive at least 100 rounds without being busted by a normal cold streak, and hope to realize a gain equal to half of their stakes -- $100 in this example.
A "risk of ruin" analysis reveals the following for a single-zero table:
The projections for a double-zero game with the "return half" feature are:
Specific values would differ but the trend would be the same for any of countless other similar hedges. Namely, this conservative approach to gambling improves chances for a long session on a given bankroll, but makes reaching any specified profit level less likely.
Should you hedge or go flat out? Shoot for the moon or opt for as much action as your money can buy? You'll have to decide on your own, in light of your reasons for gambling in the first place. I can only give you the pros and cons of the approaches. More or less what the poet, Sumner A Ingmark, had in mind when he wrote:
So I can help you with a clue,
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