Tennis Hedging Strategy - Revisited

I've had a couple of friends ask me to explain the Tennis Hedging Strategy in more detail.

In essence, it is based on the fact that there is significant volatility in-play in virtually every tennis match and that, irrespective of the opening position you take at the start of the match the likelihood is that you'll be able to successfully hedge that position for a guaranteed profit - as long as you are not greedy. Check any graph towards the end of a match and you'll see the evidence.

Now, you can take that idea as is and look for a 20% profit, say, to level stakes. Based on the musings by Peter Webb, that first sparked my thinking, you'd have a high hit rate. You could obviously increase the hit rate by looking for smaller profit. Conversely, look for increased profit at the risk of reducing the hit rate.

All well and good so far. I wanted to take things a bit further, satisfy the inner gambler in me and look to increasing my return. The first thing that sprung to mind was to think of a tournament as one large bet, with each match being a component part of that. Throw in what I call a 'Rolling Accumulator' where the original stake and winnings are reinvested in subsequent bets and the Tennis Hedging Strategy was born.

So, I came up with the following guidelines:

1 - Decide the TOTAL amount of cash you'd be prepared to lose for the tournament. If I recall correctly, Peter Webb was saying that only around 10-15% of matches would fail longterm using this, essentially, blind technique. Still, you have to be prepared for the worst case scenario.
2 - Divide this total with the number of matches in the round which you wish to enter the competition. Keep in mind that if the total is a relatively small figure you may have to wait until later in the tournament due to the Betfair minimum bet of £2.
3 - Take the figure calculated in the step above and place your bet in each match of your desired round. Here's an important point; if you are laying first that figure should be your liability.
4 - Once the initial bet is matched, place a bet to close off the hedge ("down by the river" - geddit? LOL!) at the necessary odds and stake to guarantee your target profit. BinarySoft BDI makes this very easy by doing the calculations automatically. If placing this bet before the match starts make sure you use Betfair's 'Keep' facility so that it doesn't get canceled when the match goes in-play.
5 - After each match, the stake and the profit follows the winner into the next round where your stake will be a combination of the total return, including original stake, from two matches. The table below illustrates the progression through to the start of the final.
6 - If one hedge fails, then the stake for the match in the next round is the return from the other winning match.
7 - If both matches that feed the next round fail then that particular branch of the bet grinds to a halt.
8 - You do NOT need to bet on every match. Say, for example, I don't like the look of a particular match - like the Mauresmo v Cibulkova match last night - I simply ignore it. The stake that you would've used on that match is carried forward to the next round.
9 - At any time, you can withdraw some of your profit to protect your investment at the expense of reduced stakes in the next round.
10 - You can stop at any time. You do NOT need to keep reinvesting throughout the tournament.

Notes on the above table:
  1. The totals at the bottom of each stake column give you the return, including stakes after the previous rounds.
  2. The figures are based on a target of 20% profit and do NOT include commission.
That's it. I hope that is a little clearer, but obviously, if you have any questions just leave a comment and I'll get back to you.

I do have another variation on a theme but I'll leave that for another day.


Anonymous said...

Interesting read mate!

Good to see you are thinking about different stratergies - something I should start doing again!

If I read that right from an itial outlay of £64 you get a profit of £127.10 as after the final you will have made a further 20% on the £159.25 taking the total after the final to £191.1.

So a 198.6% return on your investment. Sounds very good! May give it a go with say £32 and see what happens - If I lose it isn't the end of the world and allows me to start think things through and getting new ideas. Think I would take out some of my original stake along the way though.

Thing to consider is the inevitable losing run that will happen at some point and how that impacts.

All food for thought though and has got me thinking!

Hope you had a better day today than me!


Alistair said...

Hi mate,

Yes, that right! A nice tidy profit ONLY if all your hedges are successful.

But you are absolutely right in that it might be wise to remove some of your original stake as you go along. It is completely flexible in that you can chose the target % profit per match; you do NOT need to get involved in ever game; you can stop whenever you like; and, as you say, you can take out profit as you go.

I'd probably not get involved in the final. No point in putting everything in the one basket. Alternative, I'd consider only using the profit I'd earned so that I was in a no lose position.

Complete flexibility. But remember, this is a bet not a trade and it should be treated as such. It simply uses trading/hedging techniques to achieve it's ends.


Loocie said...

Hi Alistair,

really good post! Keep up that good working!
Now I understand your point of view of the strategy. It is different to mine, but it is always good to see different approaches.

All the best, Loocie

Anonymous said...

Hi Alistar

Interesting idea, without knowing much about the game. Does it make any differnce about selections to either back or lay. For instance surely Backing Roger Federer At 1.5 with the hope of trading out at 1.3 is more achivable than backing his opponent and hoping his odds will shorten. Do you use any kind of selection method?

Alistair said...

Generally speaking, very short priced favourites like Federer should be avoided. however, consider this:

Fed often starts as a 1.10 ish favourite, even when the tournament is reaching it's conclusion and one would expect he is meeting tougher opponents. Irrespective of his opponent, there's a VERY good chance he'll drift - albeit a handful of ticks.

If we use our stake as a LIABILITY and lay him, the backers stake will be so much greater. Consequently, to achieve our target of 20% of our liability he only needs to drift 2 or 3 ticks.

I haven't used this method in anger yet as I've been concentrating on building my bank via the horses. As a result, I haven't thought in depth about a selection method. However, the whole thrust of Peter Webb's article was, as I understood it, that this would work on a high percentage of matches - 85%-90% if memory serves - and the less greedy you are, the higher the success rate.

As I said, I haven't used it in anger yet, so I cannot vouch for those percentage figures - or indeed my memory! LOL!