Sports Betting: Risks And Benefits Of Wagering On Futures



In sports betting, a futures bet entails a wager placed on an event that will happen in the distant or near future. The most common futures bets include wagering on the team that will win the championship (e.g. NFL Super Bowl, MLB World Series, or NHL Stanley Cup) or a player to win individual accolades (e.g. MVP or Rookie of the Year). Futures bets are often an enticing and exciting betting option but with any type of wager, there are risks and benefits involved. Below are some advantage and disadvantages of betting futures:

Benefits

Potentially Great Values and Payouts – Since the result of distant future sporting events are so difficult to predict, futures bets often include better values and payouts. Correctly picking a MLB team to win the World Series before the regular season begins would be a long shot, which is why the payout for making a correct pick will likely result in the bettor winning back many times his original wager amount. Over the course of a season, many things can change that may render an early favourite to win it all to being relegated to a non-contender due to player injuries, in-season trades, or coaching changes.

Hedging Opportunities Down the Road – In the stock markets, a hedge is defined as an investment to reduce the risk of adverse price movements in an asset and is analogous to taking out an insurance policy. In order to illustrate how hedging works with futures bets, I will use an example of the Chicago Cubs and Cleveland Indians in last year’s MLB World Series matchup. Let’s suppose that I placed a $100 bet on the Cleveland Indians to win it all before the start of the regular season with a payout of 20:1 or $2,000 net profit. Now, let’s fast forward to the World Series, and I’m not feeling too good about my Cleveland futures bet since I’m starting to believe that the Chicago Cubs seem like a team destined to break its curse. As the Cubs are favourites to win, I’m only able to receive a payout of 0.5:1. However, due to the fact that I placed my Indians futures bet such a long time ago, I’m essentially able to hedge my position and obtain a net profit regardless of the outcome of the World Series. By placing a $1,400 bet on the Cubs to win at a 0.5:1 payout, I am guaranteed to make a profit. If the Indians win, I net $2,000 from my futures bet but lose my Cubs’ bet amount of $1,400, resulting in a net profit of $600. If the Cubs win, I net $700 but lose my Indians’ bet amount of $100, resulting in a net profit of $600 as well. This example illustrates the power of potential hedging opportunities down the road from a futures bet.

Risks

Great Deal of Uncertainty – After placing a futures bet, a ton of things could change from when the bet was placed to when the future event occurs. When placing a futures bet on a team to win the championship or a player to win an individual accolade, injuries, in-season trades, coaching changes, or playoff matchups and seeding could significantly influence the outcome of the future event. Numerous variables can be tough to account for and as a result, luck often plays a huge factor in determining the outcome of the futures bet.

Opportunity Cost – Since a futures bet involves tying up money for generally a long period of time, the money that is tied up represents money that cannot be used for investment purposes elsewhere, whether it is in the form of betting on the moneyline, point spreads, game totals, or even investing in the stock market. In addition to the risk of potentially losing the futures bet, the opportunity cost of not being able to use the tied up money elsewhere represents another risk of betting on futures.