# Hedging

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Canonical: https://novigapi.com/learn/hedging

Hedging is placing a bet on the opposite outcome of a position you already hold, to reduce risk or lock in a guaranteed result.

```
equal-result hedge stake = original potential return / hedge decimal odds
```

Hedging means betting against your own position. If you hold a futures ticket or a parlay that is one leg from paying, you can bet the other side so you win something whatever happens. A full hedge locks in the same result on every outcome; a partial hedge just reduces how much you could lose. Hedging always costs expected value, because the hedge bet carries its own vig or spread, so it makes sense only when lowering risk is worth that cost to you.

## How it works

To equalize the result, size the hedge so that it returns the same amount as your original position would pay. If your original ticket would return R and the hedge is at decimal odds d, stake R / d on the hedge. Then whichever side wins, you collect R, and your profit is R minus everything you staked.

## Worked example: a futures hedge

A $50 futures ticket at +800 would return $450. Before the final, the other side is -150 (decimal 1.667). Hedge stake: $450 / 1.667 = $270.

Equal-result hedge on a $50 future at +800

| Outcome | Future | Hedge | Net |
| --- | --- | --- | --- |
| Your team wins | +$400 | -$270 | +$130 |
| Other team wins | -$50 | +$180 | +$130 |


Either way you net $130. The [hedge calculator](https://novigapi.com/hedge-calculator) does this for any price, and the [parlay hedge calculator](https://novigapi.com/parlay-hedge-calculator) handles a parlay that is down to its last leg.

## On Novig

On Novig, hedging a position is buying the opposite outcome, or simply selling your contracts back. Suppose you hold 1,000 Yes contracts bought at 30% ($300), and Yes now bids 80% while No bids 18%. The No ask is 1 - 0.80 = 20%. Buying 1,000 No contracts at $0.20 costs $200, and now you own both sides: you collect $1,000 whatever happens, for a locked profit of $1,000 - $300 - $200 = $500. If the event is live, the hedge pays the taker fee of 0.06 x 0.20 x 0.80 x 1,000 = $9.60, leaving $490.40. Alternatively, if a resting bid will take your Yes at 80%, selling returns $800 for the same $500 profit before fees. The [Novig fee calculator](https://novigapi.com/novig-fee-calculator) prices the hedge fill.

## Common mistakes

- Hedging out of habit. A hedge at a poor price gives away expected value; only hedge when the risk reduction is worth it.
- Forgetting the original stake in the sums. The equal-result stake is based on the full return, not just the profit.
- Ignoring fees and spreads on the hedge leg. On a live Novig fill, the taker fee comes straight off the locked profit.

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