Hedging

Hedging means betting the opposite side of an existing position to reduce risk or secure profit. It's trading potential upside for certainty.

How Hedging Works

Example: Super Bowl futures hedge

August: Bet $100 on Chiefs +1000 (win $1,000) February: Chiefs make Super Bowl vs Eagles

Strategy	If Chiefs Win	If Eagles Win
No hedge	+$1,000	-$100
Hedge $500 on Eagles -110	+$545	+$355
Full hedge (calculated)	+$450	+$450

Hedging trades the $1,000 potential for guaranteed ~$400-500.

When to Hedge

Hedging makes sense when:

Risk tolerance changes. The bet was responsible at $100, but $1,000 swings are too stressful.

Information changes. Your original thesis is now uncertain (injury, new data).

Life circumstances change. You need the money more than the potential upside.

The hedge is +EV. If you're getting value on both sides, hedge away.

When Not to Hedge

Hedging often destroys value:

Vig drag. Every hedge pays vig. Two bets × vig < one bet.

Emotional hedging. "Too nervous to let it ride" isn't a mathematical reason.

Small edges. If you had edge on the original bet, hedging cancels it.

The mathematically optimal approach is usually: don't hedge unless circumstances have changed.

The Hedge Math

To calculate a full hedge (equal profit either way):

Hedge amount = (Original potential profit × Original odds decimal) / (1 + Hedge odds decimal)

Or simpler: use our Dutching calculator to balance positions.

Partial Hedges

You don't have to fully hedge:

Hedge Level	If Win	If Lose	Risk Profile
0% (no hedge)	+$1,000	-$100	Full variance
25% partial	+$800	+$100	Reduced variance
50% partial	+$600	+$250	Balanced
100% (full)	+$450	+$450	No variance

Partial hedges let you lock in some profit while maintaining upside.

Hedging in Prediction Markets

On Kalshi, hedging is straightforward:

• Buy YES at 30¢
• Price moves to 60¢
• Sell YES at 60¢ (or buy NO at 40¢)

You've locked in ~30¢ profit regardless of outcome. This is closer to trading than hedging.

Related Terms

• Vig — Cost of hedging (you pay it twice)
• Dutching — Spreading across multiple outcomes
• Middling — Similar concept with spread bets
• Futures — Most common hedging situations