How to work out a hedge stake

A hedge stake that evens out the result is the original bet's total return divided by the decimal price of the other side. Everything else about hedging follows from that one division.

Total return means stake plus profit, because that is what the original bet pays if it wins. The hedge has to pay the same total if the other side wins, so the two outcomes end up at the same number.

The arithmetic does not say whether to do it. Evening out a result gives up the expectation of the original bet, and if the hedge price carries a large margin, the even result is smaller than the bet was worth.

Which is where it goes wrong. The hedge is sized by feel — some off the table — which leaves a position that is neither the original bet nor an even one, and nobody can say afterwards what it was meant to be.

What to do with it. Decide first whether you want the outcomes equal or a stated fraction of the risk removed, then calculate the stake for that rather than estimating it.

Work it out. The hedge calculator gives the stake that evens out the result for any two prices, and what is left on each side.