LVASports.com's Fezzik responds:
It is very rarely correct to hedge things like 3-team parlays on the last leg. In this case you've won two games already and are in a powerful position. Hedging at this point is common, however, because of bankroll concerns, but it's a strategy that will reduce your overall expectation. That said, I'll allow that hedging has its place.
One scenario for hedging occurs when the sports book has literally forced you to play a long shot with lots of variance. An example of that used to result from a wrinkle several sports books had many years ago that paid consolation bonuses if you went 9-1 on 10-team parlays. These parlays were so lucrative, they literally forced you to go for the home run.
The most extreme example was at the Red Lion books in Northern Nevada, where they paid 400-1 on 9-teamers and 800-1 on 10-teamers, but also paid 50-1 for 9-1 tickets on 10-teamers. With 512 9-team combinations, the coin-flipping player was at a 22% disadvantage. But amazingly, randomly picking all of the 1,024 combinations in separate 10-teamers resulted in one 800-1 payout and ten 9-1 tickets, for a total payout of $1,300 for every $1,024 paid in!
It wasn't practical to play all the combinations, but every card you could get in was strong and there were many many 10-team cards in play that resulted in some 9-0s with a game to go. In those situations, that 10th leg was huge. It's not that the players wanted to bet a parlay that high, but rather that they were forced to by the great payout structure (something like going up a denomination in video poker to play a monster royal flush progressive).
In these cases, a player could bail out on the final game by hedging back the final play. The hedge play was almost never positive expectation, but given the high variance (ups and downs of your bankroll) involved, it was mandatory to lock in some payday to keep funds available to keep playing in future weeks.
On a smaller scale, lots of books used to offer 7-1 (8-for-1) on off-the-board parlays. This payout was so good, it was optimal to make all your bets in parlays. Then, if a whole bunch of 2-0s were in play flowing into a key third game, good portfolio management again demanded a play back on the other side.
The most common time to hedge is on a future when you've bet a little to win a lot. For example, lots of players had the Cardinals to win the World Series this year at anywhere from 15-1 to 999-1 (MGM wrote a $250 ticket at 999-1!). Given the zero-or-huge-payday scenario, it's prudent to lock in a profit and hedge back. It would be like a blackjack player used to betting red chips being given a $5,000 free bet and getting a natural against a dealer ace. At this point, the negative-expectation insurance bet (for less) to lock in a profit makes some sense.
And here's a little tournament play with the hedge in mind. In a weekly contest like Coast's Pick the Pros, where you pick teams straight up to win, knowledgeable players like to check the Monday-night favorite on their picks. Now if they roll a perfect card going into the last game, they can hedge by betting the underdog with the points. This locks in a profit and gives them a chance to double dip if the favorite wins but doesn't cover.
