Cash Out - Is It Worth It?

Cash out or cash in is the facility to close your bet down before the event comes to its conclusion. It provides an opportunity to lock in a profit or minimise losses.

Is it worth doing? Most of the time I suggest the answer to that question is no, but that doesn’t mean to say it can’t be beneficial.

People wonder sometimes why I am so dismissive of insurance. I respond that I’m not dismissive but just because it’s there doesn’t always make it necessary. I buy insurance when it is a legal requirement, covers a catastrophic situation that could put a strain on my finances or when it comes across as useful but inexpensive.

Insurance and betting have many similarities. They involve risk assessment. It’s just that typically insurance covers a physical risk whereas gambling is an entertainment industry with a buzz attached to it and that is what generally makes cash out a poor deal.

It is a way for bookmakers to win even when they lose. If somebody places a bet on an event and it is not going their way, then they are unlikely to use cash out. Here’s the psychology. I am not going to lock in a loss. That doesn’t make me feel good and there’s still time for things to turn around anyway.

So, generally the time people will use cash out is to lock in a profit. A profit is on the table so, instead of questioning whether it’s a good deal to take the money and run, people will just do it. Which brings me back to the insurance comparison. If I’ve placed an accumulator which is going my way and the value of the pot is running into the thousands, then there may be a greater justification for taking that profit. It is becoming more like a catastrophe and could make a significant difference.

If I’m betting £20 a time and my possible winnings are £50,000, currently valued at £25,000 for cash out, I might be tempted. The amounts are more than I am used to dealing with and I could find a nice home for the money. To end up with 0 would be hard to stomach.

However, if possible winnings are £40, to end up with 0 isn’t what I want to see but would be a manageable loss. So different scenarios can lead to different responses.

Is it value, though? Usually not. Based on the fact that bookies are there to make money, their odds should reflect a profit margin. To come out of a position should just magnify their theoretical profit margin, even if you yourself are making money on that individual trade.

The reason I started looking into this subject was that I placed a bet at 11/10 and wanted to get out the other side at 6/5. I wanted to cash out but couldn’t do so. I had to place an additional bet and wait for the bets to conclude. In that step there is an advantage to cash out – you get your bet settled early.

It got me looking at other positions though. I had a £200 bet at 11/8 that was being offered for cash out. The offer was for £213.19. How could I value this?

My updated assessment of the price for this event was now 1/1. So, taking the original odds of 11/8 and dividing it by the 1/1 gave me a factor of 1.1875 (odds as decimals 2.375 / 2). That was the factor I felt the bet had increased in value by. Multiply it by the stake to give a new valuation of £237.50.

Statistically my estimate of a fair value to close out at would have been £237.50 and any offer above that would represent value. Anything below, such as the £213.19, represents good business for the bookmaker.

Even that doesn’t tell the full story. Why have the bet in the first place? Because I felt it represented value and there’s always the possibility of bias on my part. When I reprice the event it’s possible that I hold a bias that led me to the bet in the first place. Pain in the butt that it is, recording your transactions with ultimate profit and loss can tell you much about your approach. Including the price you think it should be allows you to calculate your long term expected profit. Given time you can make comparisons between your actual profit and expected profit to tell how consistent your pricing methodology is.

That’s the ideal. If you at least record stakes and returns you can get an overall assessment of your success or otherwise.