'Cover your ass' Bet: This is part of my betting strategy on certain games / certain futures. The strategy is to make sure that a return on a bet of one which has the lowest priced odds (the favourite), will be enough to cover the the higher priced ones (the smaller probability). Here's where my very limited knowledge on Finance comes into play.
The strategy here is not to 'make as much money as possible' but rather to minimise your losses.
Ie, you put random bets on several 'outcomes', even though you think the 'favourite' outcome is most likely to win. After that, 2 scenarios would most likely happen.
Scenario ONE: 'Favourite outcome' wins, your net position (factoring in outlays into the returns) would most probably be (a) a small loss; (b) or no change in your net position (no win, no lose). Why make such a bet when EVERYONE betted on the favourite, EVERYONE won someting - but you are stuck with either a small loss, or no win no lose? What's the point of betting? But look at scenario two...
Scenario TWO: 'The Favourite losses, the second favourite / third favourite wins' Now here is where you make money. Usually the second favourite, third favourite or someone down the line has odds / returns that are so good, that a win would most likely cover your entire outlay plus more often than not you get somethig extra. And what happens to EVERYONE else? They lose because they betted on the favouorite. What happens to you? You earn a small profit.
So essentially your outcome of doing a 'cover your ass bet' is either a) small loss / no loss; b) reasonable profit. Whereas everyone else's outcome is either a) big win, b) small win c) lose everything. Who has the better 'outcomes' ?
Of course, the 'cover your ass bet' is subject to few constraints. One, you must have some awareness of all the probable outcomes of all scenarios (In football betting, this translates to some knowledge of the teams, their past records, likely scenarios, line-ups etc) . Two, it works well when the outcomes are mutually exclusive (but when they are not, it may work well as well).
Here are some practical example where I have made money using a 'cover your ass' bet
Example one: Holland vs Japan success; Holland v Denmark failure
I was fairly confident of a Hollad win. The odds of a Holland win are only 1.35. I wanted to maximise my returns, so how do I do it?
First of all, I know the scores and the goal-scorers of Holland's friendly in the lead up the world cup. Van Persie scored, I think, 3 or 4 goals in 3 games, and has scored in every single friendly in that break between end of season and the world cup. So therefore I think that if Holland actually scores in a game, it would most likely come from Van Persie.
And what I knew also, Sneijder is in fantastic form for Inter before the friendly. And in the friendlies he has also scored 2 or 3 goals in just 3 or 4 games. So I came to the conclusion if Holland actually scores in a game, it would be likely to be from Van Persie, followed by Sneijder. And Sneijder takes Holland's free kicks, and he takes Holland's penalties. So more chances for him. Plus, Robben wasn't playing - so the goals if they do come, it should come from either one of these players (VP / Sneijder).
So because I thought that if Holland scores it would either be VP or Sneijder - what happens is I put a $5 bet on Van Persie to score (priced @ 2.00); and also put a $5 bet on Sneijder to score (priced @ 3.50).
What happened was Sneijder scored in a 1-0 victory. I got a $5 x 3.50 = $17.50 return. I loss on the Van Persie bet. A net positive return, as my outlay was only $10. Factoring in my total outlay of $10 (for the two bets), my odds were effectively [(17.50-10)/10 ] +1 = 1.75. which is higher than 1.35 for a Holland win.
And what happens if Van Persie scored but Sneijder didn't? $5 x2.00 = $10. No change in my net position as I got back my initial outlay. So what happens is when ONLY VP scores and Sneijder doesn't, you don't lose any money; and vice versa you don't lose money as well, and will make a profit. And what happens if BOTH scored? $5 x 3.5 + $5 x 2.0 = $27.50 .
However, this bet is not without its risk. If both failed to score it would be a net loss of -$10.00 for me. So to make this bet work, you must be extremely confident that both players will score or that the team is extremely reliant on these 2 players more than anyone else to bring in the goals.
This was a succesful bet, but note that I have used the same strategy in Holland vs Denmark game which resulted in a net loss of -$10.00.
Second Example: Top African Team
This I think was a no brainer. In fact it was too easy for me. And much less risk compared to the first example.
First of all the lowest odds before the tournament, I believed belonged to Ivory Coast and that was 3.65.
So that means if you made 3 different but equal bets on 3 different African Teams, and Ivory Coast ended up the Top African Team, you have succesfully 'covered' the losing bets, as 3.65 X$5.00 = $18.25 would cover your 3 separate $5 bets (total = $15.00) on the different teams. And if the second favourite at 4.00 + ended up the Top African Team, and you made 3 bets, you actually receive a positive return factoring in the intial outlay.
And you could even make 4 different bets, and make just a small loss if Ivory Coast do end up top ($20 - $18.25 = $1.75 loss); but if the team with the lowest odds do actually pefrom the best (example some team with a 6.50 payout), you still make a hefty profit. Your bets on the other teams are effectively an 'insurance' = minimising your losses in the event that most favoured team wins.
Of course, if you bet on 3 or 4 teams, you would most probably win very little. So the optimal bet would be betting on 2 teams you think would most likely end up the Top performing African team in this competition (but note, this increases the risk. Finance: Higher returns = higher Risk).
What did I do in the end? I placed two different bets on Ivory Coast 3.65; and Ghana 4.50. I of course took into account the opponents in the groups of all the Africans (eg South Africa has tougher opponents; at the time of bettting Portugal were not doing so well and Nani just got injured; and Serbia was performing very very poorly in friendlies) and also their lead-up to the tournament (Cameroon and Algeria had terrible preparations to the tournament, Cameroon losing many friendlies, and Eto'o in particular was affected by Milla's comments) in making this bet.
So what happens is regardless of which team became the Top African Team (Ivory Coast or Ghana) I will still make a good profit. This was a no brainer considering all the circumstances of the other African teams in the tournament.
Conclusion
Now you understand the underpinnings of my actions in making several bets of in particular categories (eg Top European Team, Top African Team, WC Golden Boot, Player to Score etc). It is not a 100% guaranteed win strategy, but as I've said earlier, the ultimate aim of this strategy is to 'minimise your losses'. Your insurance = the favourite. The 'profit / favourable event' / you win = when the outcome with the lesser probability (the higher odds) prevail.
Hedging
In Finance, there's something we call a 'Hedge'
In finance, a hedge is a position established in one market in an attempt to offset exposure to price fluctuations in some opposite position in another market with the goal of minimizing one's exposure to unwanted risk.
Eg. For example, if you think your that overall share prices are going to go down. You buy a 'put option' (an option to sell at a certain price) on he shares that you currently hold. So when the share prices drops below a certain price, and you have a put option to sell at a price higher than that price. You 'covered' your ass.
It works like insurance - minimising your losses in adverse circumstances.
And I would like to leave you with a GOLDEN RULE in Betting, which is fundamental in the workings of my above strategy
Only Bet What you're Willing to LOSE
very pessimistic view. But this is golden and will probably result improved fortunes for you.
Example, Brazil vs NZ with odds of 1.01. A guaranteed win, making money has never been this easy. You place a $10, 000 bet on Brazil to win an easy $100 win. But... how much would you lose if a draw actually occured? $10,000
So the result of adhering to this fundamental creed is you don't make bets which results in a HUGE loss, or a loss you're not willing to suffer. Everytime you make a bet, think FIRST: how much will I lose if this doesn't work out? AND, think later: how much will I win from this bet?
If you bet to win, you're almost guaranteed to lose. Because no matter how expert you are, it doesn't matter in Casino games, or in football analysis - there is no absolute guarantees. A football pundit , or a mathematician cannot say to you for sure that 'this team will /must win'. It doesn't work that way. If even they can't tell you that for sure, you are in a lesser position to make such definitive statements.
By betting to win, when you're on a losing run, or when you lost on particular game, you fall into the trap of trying to 'win back' (more like 'earn back') the money lost. It doesn't work that way, and is a particularly dangerous way of betting. A win is not absolute, and the mindset of a particular better who bets in such a way is more like 'earning back the lost sums' which just fails the theory of 'probabilities' because 'earning' you can say for sure how much you will win. Gambling = probabilities, there is nothing definitive about gambling.
And if you bet what you're WILLING TO LOSE, you most likely won't fall into the trap of 'Shit, I lost $500 on my last bet... that is way too much, how am I ever going to get back that money?' , more often than not, people would resort to larger bets to 'win' back that money. If however, you bet $100, and don't make such a big deal out of it, you will less likely fall into the trap of being obligated to earn back that sum.
And its this loss minimsation theory that makes my above strategy of 'hedging' work.
And I'm sure this loss minimisation theory would perhaps work for other betting strategies as well, that I'm not aware of.
In here is where the Financial theory comes into play as well, Higher Returns = Greater Risk.
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