Managing risk in 2025

Modern sportsbooks have innovated in ways both beneficial and harmful for bettors.

One invention is the “cash out” feature most sportsbooks offer, allowing you to exit a bet midstream and lock in a profit (or loss).

Exchanges and prediction markets allow a similar dynamic via “trading out” of your bet or “position”.

While both of these tactics typically reduce expected winnings — the big question is: do they ever create value for winning bettors? 

When are the optimal situations to cash out or trade out? How do those differ on sportsbooks vs. exchanges?

As the Robin Hood of sports betting, taking from the house and giving to the bettors, I’m eager to share what I’ve learned on this topic!

Today, we’ll start with the basics: what is “cash out” and why do sportsbooks offer it.

Then we’ll talk about how prediction markets are different..

As always, we’ll keep our winning ways and close with this week’s Bets of the Week!

Let’s get after it.

What is Cashing Out?

Cashing out, or trading out of your position, serves the same purpose: to reduce future risk for a bettor, and lock in an outcome (frequently a profit).

Cashing out, the sportsbook’s one-click innovation, is the more convenient option of the two, thought it is not always offered or available.

The sportsbook will offer you a single price at which they will buy you out of your bet, and you can take it or leave it. Here is a visual:

Trading out of a bet on a prediction market involves selling some or all of your “position” (your existing bet) at the new market price.

There are many situations where you might be tempted to take one of these actions, including:

1. Cashing out before the last leg of a big parlay after winning all others.

2. Reducing your position on a team you hold a futures bet on, in the playoffs.

3. Grabbing profits live during a game when your team is off to a hot start.

Let’s go deeper on the concept.

The Downsides of Reducing Risk — Why not to Cash out

As I’ve preached before, one of the best ways to become a winning bettor is to reduce the house edge you play against, minimizing the impact of the vig.

Cashing out flies in the face of this goal, because you must pay the vig twice — once on your initial bet, and again on the “cash out”. Let me explain…

Cashing out is a drain on expected value because the books almost never offer you a fair price in their buyout offer.

Think of the cash out price offered as a less generous variation of the banker’s strategy on the show “Deal or No Deal”.

When two suitcases are left, one with $1M and one with $1, the game show player might be offered $425,000 to sell their case and “cash out”.

If you replaced that banker with a sportsbook cash out algorithm, they’d be offered even less!

Why?

This is a money-making venture for the books.

What do DraftKings or FanDuel hope for when they present you with a cash-out button? Are they making you a generous offer out of the goodness of their hearts? Not in this lifetime, readers!

This “feature” is offered to bettors (and probably got some employee a promotion) because it created so much shareholder value for the books. Don’t fall for the bait!

How prediction market betting is different

Rather than betting into “the book,” as happens when you wager on a traditional sportsbook, prediction markets pair bettors who want opposite sides of a particular market.

For example:

If I think the Dodgers are 56% likely to win tomorrow (a moneyline of -127), and you’re happy to bet the Blue Jays at 44% (+127), exchanges like Kalshi will pair us up and take a small transaction fee.

Because of this “peer-to-peer” structure, trading out of a bet doesn’t cost more than entering one, and pricing tends to be much more favorable.

Here’s a live case I’ve been thinking about.

I bought 5,324 “contracts” for New England to win the AFC East before the season started. I paid a little more than 13c for each.

Using betting terminology, I wagered $700 at +660 to make $4,620 in profit if they won.

The 6-2 Patriots are now considered 47% likely to win their division, and I could exit my bet today, fully or partially, with a profit of around $1,550 if I closed the whole thing.

Because there’s no extra vig in this instance, my job is to assess New England’s chances of realizing the equity of my bet by winning the division — full stop.

Prediction markets allow you to reevaluate your bet for its entire lifetime — amazing flexibility with comparatively little penalty compared to sportsbooks’ “cash out” described above.

The psychology of how to navigate this freedom could be it’s own newsletter (maybe I’ll write it), but for now — avoid the “cash out” button always, and trade out only when you see independent value at the new price.

Bet(s) of the Week $$

Last week we swept both bets, going 2-0 and adding two full units!

On Thursday, Oronde Gadsden easily cleared 41 yards, finishing with 77 yards on 5 catches.

Despite Lamar Jackson being a surprise scratch from Sunday’s game, the Ravens handled the Bears by two touchdowns, keeping their season on life support one more week.

With that outcome, we’re again at an all-time high!

Since starting the newsletter, bets in this section are ahead 23.98 units, with a positive 21% ROI. A $100 bettor would be up $2,398! We’ll update this regularly.

Based on my research, I am making the following bet this week:

• Teaser bet: Ravens -1.5 (teased from -7.5) + Lions -2.5 (teased from -8.5) @ -125 on Caesars for 1 unit

This is a “Wong teaser,” which means we’ll start with a mathematically favorable expectation. On top of that, I feel good about the respective QB advantages these two teams will have with Lamar Jackson returning for Baltimore, and the Vikings handing the keys back to McCarthy.

• Derrick Henry over 79.5 rushing yards (alt line) @-150 (60%) on Kalshi for 1 unit

The Dolphins bring one of the worst running defenses in the NFL (five yards per carry allowed). Henry is averaging 20 carries per game over his last three, and the return of Lamar Jackson should make the offense considerably more dynamic.

If you can’t match this price on an exchange, over 87.5 at -110 is a solid alternative.