The ‘Cash out’ feature is a quick and easy-to-use tool available to many betting providers. It’s a feature that lets you take profit or loss in some cases before the game has ended and settled.
Cash out lets you settle with a loss during a running match, which may offer some benefits if you think that your selection chances are reduced significantly once a match has started.
If you’ve been in the betting space for a while, you might have heard the term ‘Cash Out’ from time to time. It is highly popular among betting enthusiasts, but what does it mean? And does it really benefit you as a bettor? We will explain these points in this article:
- What it means to “Cash Out”
- The formulas behind Cashing Out
- Other options besides Cashing Out
- Conclude if you should Cash out or not
- Avoid Cashing Out your value bet
Is Cashing Out a Value Bet a Good Idea?
The option of Cashing Out has been popular for many bettors in recent years. However, the truth is that it’s grown to be a lucrative revenue source for bookies.
Even if cashing out is considered a safe option, it’s a middle way between partially making some money and risking losing everything. It’s an option that ensures you can get payment at any point during a match, as you can withdraw from the bet once you’re in the lead.
Let’s say we have a football match between “Team X” and “Team Y”. If you bet $100 on Team X with 2.80 decimal odds, then your full payment would be $280.
If Team X is ahead during half-time, but you think they’re running out of steam, you may consider cashing out to receive a slice of the full payment. This cancels the bet for the amount of time left and you might only get $140 instead of $280.
This works to eliminate the risk throughout the second half, where Team X might not keep up a good performance until the end of the match. Or if Team Y seems to show a burst of strength in their playstyle in the latter half.
What’s the Formula that Lies Behind Cashing Out?
The formula behind Cashing Out consists of real-time odds and the full payment of the running bet.
The previous example shows that the Cash Out option at half-time was $140 instead of the full $280. Obviously, you’ll receive a lower payout from the Cash Out option compared to the total amount. However, if we look at it closer, it’s even lower than the “fair” amount as well.
You can check out the fair amount of Cash Out option with the following formula;
Full payment of the bet / real-time odds
When using the formula on the example above, we have;
$280 / 1.40 = $200
This indicates that Cashing Out at half-time would lose you $80 compared to the bet’s fair value at that point in time.
Also, keep in mind that bookies take commissions on the cashout, which is significantly higher than they used to take the bets. Therefore, you won’t receive the total $200, as there will likely be a 25% commission or even higher.
This is likely to be the case at any time and match, as the bookies are looking to use every opportunity to make money from the bets. In this case, they are ensuring they won’t lose more money from the bet.
The bookies are likely to have a margin on the odds and also a margin on the provided opportunity of the Cash Out. This is why we think Cashing Out may harm your long-term profitability and shouldn’t be part of your betting strategy.
However, there are specific conditions where Cashing Out may be an attractive option. Let’s look at more of this below.
When the Available Cash Out Option Exceeds the Market Price
There are small chances that the Cash Out option offers a higher value than the odds from bookies offer. It’s an indication that the provided Cash Out option is listed at a value above the fair price, which is indeed a favourable option you can take.
Acting Rationally and with High Values
As we’ve previously mentioned, your long-term betting plan should be to maximize profits by looking at all bets to the end of the game. This means that you should be aware of your bets’ happening as they unfold and look for the best options. Despite this being the case on almost every occasion, acting rationally should also be part of your strategy.
Cashing Out may be relevant when discussing bets that consist of a large amount of money or if a bet with extremely high odds is close to being fulfilled. During these situations, you can choose to act rationally and Cash Out with guaranteed payment.
For example, betting on a team with a lower chance of winning the league, with a $2,000 stake and 200.00 odds, is close to the end of the season. However, their performance has improved drastically and they’re a few games away from gaining the lead if they manage to keep up this playstyle.
Situations like these are where the Cash Out option might be a sensible thing to consider so you can get some guaranteed payment instead of risking being left with nothing.
The bet’s full payment would’ve been $400,000 with the cash out option at $200,000. However, the fair price would be the real-time odds of 1.80.
In this case, you should have received the actual value of $222,000. Therefore, the Cashing Out option might not be a bad idea even if you feel like you should’ve made more money. So, in case you’re in a big bet on Newcastle to win the Premier League with 200 odds and they are leading with 4 points and 2 matches to go, the Cashing Out option may be worth considering. However, you shouldn’t bet on it in the first place as the variance is sky-high. Also, the bookies take incredibly high margins on futures markets, which diminishes the value.
Lowers the Opportunity Costs
When you proceed with bets that are connected to a lengthy time frame, the opportunity cost will also increase. This is the opposite for bets with a shorter time frame, as the opportunity costs will decrease.
Thus, Cashing Out on some bets with long time frames may lower the opportunity costs if the right opportunity does appear.
Is there an alternative to Cashing Out? In our opinion, there is one option;
Hedging a bet helps reduce a risk level and decreases your return on investment. It’s an alternative to Cashing Out that may also put you at a bigger risk of having to void your bet. However, when placing the hedge side of your bet at a betting exchange or sharp bookie, you should be fine in most cases.
Hedging, in simple terms, exploits the differences and changes in odds between one bookmaker to another, creating a guaranteed profit from a specific game. This doesn’t happen very often, but there are particular situations where this may happen.
If team X has high odds way before the kickoff and suddenly changes into Team Y’s favour, this gives us the chance to exploit. As long as the bet’s profits from both sides cover the risk on the other, the bet’s total profit will be guaranteed. You can usually get better odds on hedging the bet than you will on the Cash Out option. Therefore, we think it’s the better option of the two.
The Cash Out Option Shouldn’t be Part of Your Long-Term Sports Betting Strategy
Besides losing on the margins the bookies take and from the provided Cash Outs, the bet’s Expected Value will decrease compared to seeing out the bet. You may even get into the risk of getting limited or even getting banned from some bookies.
So, what’s the expected value? In the theory of probability, the expected value of a random variable is intuitive, the long-run average value of repetitions of the experiment. For example, the expected value of receiving tails during a coin toss is 50% or 0.5 chance of the outcome to occur.
The Cash Out feature is a relatively new addition to the sports betting space and has already become a popular option with bookies and bettors of all experiences.
The few things that are absolutely certain about cash out are its joy and how it’s integrated into most bookies. Sometimes a game will meet all the right conditions and Cashing Out at the right time will bring you decent profits. However, at other times, you might end up with a loss due to this feature, especially in the long run that we’ve stated above.