Back-lay hedging explained for betting

In one sentence

Back-lay hedging, or greening up, means placing an opposite bet on the exchange after the price has moved, so you finish with the same profit, or the same smaller loss, whatever the result.

How it works

You back a selection at one price. Later the price shortens, perhaps after a goal or a steam in the betting. If you now lay the same selection at the shorter price, the lay's liability is smaller than your back's potential profit. Size the lay correctly and you lock in a profit on every outcome. Betfair shows this as green figures, hence "greening up".

It works in reverse too. If the price drifts after you back, laying at the bigger price locks in a smaller, equal loss on every outcome. Traders call that "redding up", and it is how they cut a bad position.

Hedging does not change whether the original bet was good value. It trades future upside for certainty now.

The maths

L = \frac{S_b \times O_b}{O_l}

\text{Locked profit} = L - S_b

L: the lay stake to place.
S b: your original back stake.
O b: the odds you backed at.
O l: the current lay odds.
Locked profit: the result on every outcome before commission (negative if the price has drifted).

In plain English: lay a stake equal to your back's total return divided by the new price, and the difference between the two stakes is what you lock in.

Worked betting example

Football on Betfair. You back Manchester United at 4.00 for £50 before kick-off. They score early and their price shortens to 2.50. Commission is 2%.

Lay stake = (£50 × 4.00) ÷ 2.50 = £80.
Lay liability = £80 × (2.50 − 1) = £120.

If United win:

Back profit: £50 × 3.00 = £150.
Lay loss: −£120.
Net: +£30.

If United do not win:

Back loss: −£50.
Lay win: +£80.
Net: +£30.

Betfair charges commission on your net market winnings, so 2% of £30 = £0.60, leaving £29.40 whatever happens.

Now suppose instead the price drifts to 6.00. Lay stake = (£50 × 4.00) ÷ 6.00 = £33.33. If United win: £150 − £33.33 × 5.00 = −£16.67. If not: −£50 + £33.33 = −£16.67. You have cut a possible £50 loss to £16.67 on every outcome, with no commission on a losing market.

Where it's good

Pre-match trading: back early, lay later when the price shortens.
In-play football, where prices jump after goals and red cards.
Locking in part of a big ante-post win as the event approaches.
Cutting losses quickly when a trade goes wrong.
Managing exposure when news arrives that you cannot price.

Limitations and pitfalls

Hedging a value bet usually lowers your long-run EV. If you backed at a good price, closing it early gives away some of that edge for certainty.
Commission is paid on every winning market, so frequent small green-ups get eaten away.
Betfair suspends the market when a goal goes in, so you cannot hedge at the moment the price jumps.
Price moves are not predictable just because they happened before; many traders lose money chasing them.
Partial hedges and repeated re-hedging create messy positions that are easy to mis-size.

How to build it

betfairlightweight or flumine for the Betfair API; most trading software also has a one-click green-up.
Data: your matched bets per market and live best back and lay prices with depth.
Practical tip: write down why you are hedging each time. If the reason is nerves rather than new information, you are usually giving away value.

Arbitrage: a hedge made from two prices at the same time.
Dutching: equal-profit staking across selections.
Commission-adjusted EV: what commission does to small green-ups.
Momentum: trading on the price moves that make green-ups possible.
Market impact: how your own orders move the price you hedge at.