Placing a bet on the opposite outcome to guarantee profit or reduce risk on an existing position.
Hedging is the practice of betting the opposite side of an existing position to lock in profit or limit potential losses. In prediction markets, this is done by selling your position or buying the opposite contract.
Example: you bought Yes at $0.30, and the price is now $0.70. You can sell your Yes contracts for $0.70 and lock in $0.40 profit per contract without waiting for resolution.
Hedging is mathematically -EV in most cases (you're paying vig on both bets). But it's rational when: the opportunity cost of capital is high, your risk tolerance has changed, or the probability has shifted significantly.
The average profit or loss per bet if you made the same wager thousands of times. Positive EV means long-term profit.
BankrollThe total amount of money set aside exclusively for betting or trading. Never money you can't afford to lose.
VarianceThe natural fluctuation in results around your expected value. High variance means bigger swings even with an edge.