If you think you had a rough night last night, consider the story of Mark Skiba. Mark placed a $100 bet on Auburn to win the National Championship at the beginning of the season when the odds were 500-1. So, if Auburn had won, he would have walked away with $50,000.
Apparently when Mark publicized his bet leading up to the game, many people offered him some unheeded advice regarding hedging. For those of you who do not know, the act of hedging can protect against sizable gains/losses. In this case, Mark could have bet some money (@james_tierney tweeted that Mark could have bet $34,000 on Florida State with a money line of -340) to protect his position. In this case, if Florida State won, Mark would win $10,000 and if Auburn won, he would lose the $34,000 but gain $50,000 for an overall net of $16,000. So, how would you have behaved?
In Mark’s case, he stuck with his initial $100 bet counting on Auburn and a potential payout of $50,000. Through hedging, he could have guaranteed either a $10,000 payout if Florida State won or a $34,000 payout if Auburn won. Unfortunately for Mark, Auburn lost and he missed out on the opportunity to guarantee a payout. Keep in mind that the financial markets and the casinos offer individuals the ability to hedge and when the dollars start rising, you might want to consider it.