The cash out feature offered by many bookmakers is probably one of the most used implementations of recent years. It allows punters to end their bet early and receive a set amount back regardless of the final result.
Many punters seem to love cash out as they can often lock in a profit from their bets if they are winning at the time which allows them to relax and enjoy the rest of the match. However, a closer look at the cash out feature may prove that it has its flaws.
What is Cash Out?
Cash out is a feature offered by many top bookmakers. Not all bookies offer it but more seem to be implementing it due to its popularity among punters.
Let’s say that you placed a £10 bet on Man Utd to beat Arsenal at odds of evens (2.0) which would return £20 if your bet wins (£10 stake + £10 profit). Man Utd go 1-0 up just before half time and you take a look at the cash out option. If the odds on Man Utd to win now that they are 1-0 up are shorter than when you backed them, it’s likely that you can cash out your bet for a profit. This means that you can end your bet early and collect your winnings immediately. You won’t be offered the full £20 but it will likely be more than your initial £10 stake.
Your team doesn’t have to be winning to cash out. You may also cash out when they’re losing or drawing. For example, if Man Utd were playing terribly and Arsenal looked more likely to score, you may now think that your initial bet was a mistake and would like to minimise the risk by cashing out. You may be offered less than your stake back in some situations but this may be a better option than potentially losing it all.
When can you Cash Out?
Different bookmakers offer cash out on different sports and markets. If cash out is a feature that you are likely to use, it is important to check that it is available on the market you are betting on. Many bookmakers have a symbol next to eligible markets where cashout is available.
How is Cash Out Calculated?
This is where it gets interesting. Let’s assume that you backed West Ham to beat Liverpool with £10 at odds of 4.0 pre-match. They go one goal ahead and the current odds for West Ham to win with the same bookmaker are 2.0. To calculate an accurate ‘true’ cash out amount, you can use the following formula:
‘True’ Cash Out = Potential Winnings ÷ Current Odds
Therefore, using the example above, the true cash out amount should be:
‘True’ Cash Out = £40 ÷ 2 = £20
However, if you were to check the cashout amount on a real-life example, it’s unlikely that you will be offered £20 and the amount will, more than likely, be less. This is because of the bookmaker margin or ‘the cut’ they take. Bookmakers make money by offering odds which are slightly less than the true odds. It’s also known as the bookies ‘overround’ and they do this on across all markets. It’s how they make their money.
For example, if you could bet on the toss of a coin, the true odds would be 2.0 as there is a 50% chance of you picking the right side. However, a bookie offering bets on the toss may only offer odds of 1.95. That 5% is called the bookies overround and is where they make their money.
What is disturbing about Cash Out is that bookies are able to apply their overround not once but twice. They take a cut on your initial bet and then again on the cash out amount they offer you. This is why using the cash out feature is generally bad value.
Is Cash Out a bad idea?
Generally, yes, for the reasons above. However, although they’re bad value, there are certain circumstances where cashing out may be favourable.
Long-Term Bets
Let’s say that you placed a £500 bet on Man City to win the league at the start of the 2017/2018 season. Your funds are tied up in your bookmaker account until May next year and you may find yourself short of cash. At this point, cashing out may not be a bad option, especially if the funds could be better used elsewhere.
Above-Average Returns
Now let’s say that you backed Leicester City for £10 to win the league at the start of the 2015/2016 season at odds of 5,000/1. There wasn’t many but some punters did! Come March, Leicester are 5 points clear at the top of the table and the odds have shortened to just 8/15. The true cashout amount for this bet would be £32,601 but you may only be offered £30,000 or even less. Technically, the cash out option is bad value. However, given the sheer size of the profit, it may be too much for most people to turn down or risk losing.
Alternatives to cashing out
So we’ve determined that cashing out is bad value and that the majority of the time, it’s a bad idea. Mathematically, it’s better value to let your bets run as you won’t have to suffer the additional overrounds the bookmaker apply. However, there is another option which provides better value than cashing out.
Hedging your bets
Hedging your bets means placing additional bets to cover more outcomes to guarantee a return on your bet. The easiest way to do this is to simply lay your initial bet.
Lay Bet = Betting on something not to happen
By laying your bet with the correct stake, you’re able to cover all outcomes and lock in a profit or prevent further losses regardless of the final result.
The advantage of laying your bet rather than cashing out is that you don’t incur the bookies overround. Lay bets are placed on a betting exchange rather than with a bookmaker with the odds displayed on the exchange being the ‘true odds’. You’ll often find that your able to lock in more profit by laying your bet compared to cashing out which usually makes it the better choice of the two.
However, there are a couple of things to take note of.
You’ll need additional funds to cover your lay bet – Although you may be able to lock in more profit by laying your bet, you will need funds to place that bet. This may be an issue if your bet is not due to settle in the near future as it means more funds will be tied up.
Exchange commissions – As betting exchanges do not apply an overround, they make their money by charging a commission, usually on winning bets. Each exchange has different rules and commission structures which are worth taking note of as you’ll need to know these to determine the ideal lay stake to lock in maximum profits. You should use a matched betting calculator like the one available on Profit Squad to calculate your stakes for lay bets.
Conclusion
We’ve determined that cashing out your bets is bad value due to the additional cut the bookmaker takes from your winnings. Letting your bet run its course provides the best value but personal circumstances may affect your decision of whether or not to do this. Hedging your bets using a betting exchange has a value of somewhere in between the two and is a good option should you have additional funds to cover your bet and are happy for your funds to be tied up until your bets settle.
