Hedging means taking an offsetting position to reduce risk. In prediction markets it is one of the most practical skills there is: because exactly one side of a market settles at $1, you can always construct a position that guarantees a result regardless of the outcome. Used well, hedging turns a paper profit into a locked one, or caps a loss before settlement.
What hedging is
To hedge is to hold a position that moves opposite to your main one, so a bad outcome on one is offset by a good outcome on the other. The purest version is buying equal contracts on both sides of a market: whichever way it resolves, you receive the same payout, so your result is fixed. Partial hedges reduce exposure without fully neutralising it. This is closely related to arbitrage, but the goal here is managing an existing position rather than capturing a risk-free edge from scratch.
When to hedge
- Lock in a profit. If a position has moved your way, hedging banks the gain instead of risking the outcome — the same aim as selling early, executed by buying the other side.
- Reduce exposure before a binary event. Ahead of a resolution you are unsure about, a partial hedge trims risk while keeping some upside.
- Manage a large position. If a single market has grown too big relative to your bankroll, hedging brings the risk back in line.
- Sidestep resolution risk. If a market’s settlement looks ambiguous, a hedge can remove the uncertainty.
How to hedge
The direct method is to buy the opposite side of the same market — if you hold Yes, buy No. Buying equal contracts locks the result completely. You can also hedge by selling part of your position back into the market, or, for cross-venue traders, by taking the other side on a different platform where it is priced better. The hedging calculator works out exactly how many contracts to buy and what result it locks in.
Full versus partial — and the cost
A full hedge fixes your outcome entirely, but it caps your upside: you give up the larger potential win for certainty. A partial hedge keeps some of that upside while reducing risk, which is often the better balance. Either way, the hedge is not free — you pay the spread and any fees on the second leg, which eat into the locked amount. Always check that the numbers still work after those costs. Keep every hedge within your bankroll limits.
Related strategies
Build on this approach with the adjacent playbooks:
Frequently asked questions
What does it mean to hedge a prediction market bet?
It means taking an offsetting position — usually buying the opposite side of the same market — so that a bad outcome on your main position is cancelled out. A full hedge with equal contracts on both sides guarantees the same result whichever way the market resolves.
When should I hedge instead of just selling?
Hedging and selling early achieve similar things. Hedging by buying the other side can be useful when you want to keep the original position open, when the opposite side is priced attractively, or when you want a partial hedge that retains some upside.
Does hedging cost anything?
Yes. You pay the spread and any fees on the hedge leg, which reduce the profit you lock in. A full hedge also caps your upside, since you trade the chance of a larger win for a guaranteed result.