How to hedge a bet with prediction markets (and when hedging is worth it)
Hedging locks in profit or limits a loss by betting on the other side. How to hedge a Kalshi or Polymarket position, how to hedge a sportsbook futures ticket with one simple rule, partial hedges, and what hedging costs.
Hedging means placing a second bet that pays off when your first one loses, so you lock in a profit or cap a loss whatever happens. Prediction markets make hedging unusually easy: you can sell your position at any time, buy the opposite side, or use an exchange to offset a bet you made somewhere else.
This guide shows the three common hedges with the arithmetic, and explains when hedging is smart and when it just gives away money.
Hedge 1: lock in profit on a position that moved your way
You bought 100 "Yes" contracts at 30¢ ($30). News breaks and "Yes" is now 70¢. You have two equivalent ways to lock in the gain:
- Sell your 100 contracts at 70¢: you receive $70, a $40 profit whatever happens next.
- Buy 100 "No" at about 30¢ ($30): now you hold one Yes and one No, and exactly one of them pays $1. You get $100 back for $60 in total, the same $40 profit.
Selling is usually simpler and cheaper (one trade, and on Kalshi buying the opposite side simply closes your position). Before fees, both lock in the same amount.
A partial hedge
You do not have to lock in everything. Sell 50 of your 100 contracts at 70¢ ($35 back):
| Outcome | Full hedge (sell all) | Partial hedge (sell 50) | No hedge |
|---|---|---|---|
| Yes happens | +$40 | +$55 | +$70 |
| No happens | +$40 | +$5 | −$30 |
The partial hedge guarantees you will not lose money and keeps most of the upside. It is the usual choice when you still believe in the trade but cannot stomach a round trip to a loss.
Hedge 2: hedge a sportsbook futures ticket
This is where prediction markets shine. Say you bet $50 before the season on a team at +1000. They reach the final. Your ticket now pays $550 (your $500 profit plus your $50 stake) if they win, and nothing if they lose. The opponent's "Yes" trades at 45¢ on Kalshi or Polymarket.
The rule: buy as many contracts on the other side as your ticket pays out. Here that is 550 contracts at 45¢, costing $247.50.
| Outcome | Ticket | Hedge | Total |
|---|---|---|---|
| Your team wins | +$500 | −$247.50 | +$252.50 |
| Opponent wins | −$50 | +$302.50 | +$252.50 |
You lock in about $252 either way, before fees (Kalshi's taker fee on this order is about $9.50, so roughly $243 after it). Want to keep more upside? Buy fewer contracts: every contract you leave out adds 45¢ to your result if your team wins and costs 55¢ if they lose.
The general formula: if your original bet makes profit W if it wins and loses stake S if it loses, buy W + S contracts on the other outcome at price c, and you lock in W − c × (W + S).
Sportsbooks often offer a "cash out" price instead. Compare it with what the hedge locks in: books usually build a margin into cash-out offers, and an exchange hedge is often worth more. Check that both your sportsbook and the prediction market are available where you live (is Kalshi legal in your state).
Hedge 3: hedge a real-world risk
Event contracts were designed partly for this. Some examples:
- Weather: a farmer or an event organiser buys contracts that pay if it is unusually hot, wet or cold.
- Rates: someone about to lock a mortgage buys "Fed hikes" contracts as a small insurance policy.
- Elections and policy: a business exposed to a tariff or tax change buys the outcome that would hurt it.
The contract pays when the bad thing happens, offsetting some of the cost. Size it to the damage you want to cover, not to the profit you hope for.
What hedging costs
A hedge is not free:
- Fees and spread on the second trade, highest around 50¢ (fees, spread and slippage).
- Lost expected value. If your original position still has an edge, hedging gives part of that edge away. If the market price is fair, a hedge costs you only the fees, and buys certainty.
So hedge to manage risk: when a position has grown too big a share of your bankroll, or when a loss would hurt you more than an equal gain would help. Do not hedge out of reflex every time a price moves. The sizing logic behind that: the Kelly criterion.
Hedging mistakes
- Hedging on a different market whose rules do not match your original bet: a sportsbook may count overtime differently, or settle on a different source. Read both rule sets (how markets resolve).
- Hedging with a market order on a thin book, paying several cents more than the quoted price. Use a limit order (limit vs market orders).
- Over-hedging, buying more than W + S contracts, which turns you into a bettor on the other side.
Hedging: frequently asked questions
Can you hedge on Kalshi?
Yes. Sell your contracts, or buy the opposite side, at any time the market is open. You can also use Kalshi to hedge a bet placed elsewhere.
How do you hedge a futures bet?
Buy contracts on the other outcome equal to your ticket's total payout. That locks in the same profit whichever side wins, before fees.
Is hedging a bet worth it?
When it protects a large share of your bankroll or locks in a life-changing win, yes. If you still have an edge and the position is small, hedging mostly gives away value.
Can you hedge a parlay?
Yes: before the last leg, buy the other side of that leg with contracts equal to the parlay's payout (parlays on Kalshi and Polymarket).
