Hedge calculator
The stake required on the other side to lock a result, what it guarantees, and whether the two prices together constitute an arbitrage or simply cost you something for certainty.
| Hedge stake required | $148.57 |
|---|---|
| Total staked across both | $248.57 |
| Guaranteed return either way | $260.00 |
| Locked profit or loss | $11.43 |
| Return on total stake | 4.60% |
| Combined implied probability | 95.60% |
Combined implied probability is under 100 percent, so this locks a profit regardless of result. Books limit or void accounts for this, which is the practical constraint rather than the arithmetic.
Hedging and arbitrage are the same arithmetic
Both take positions on opposing outcomes so that the result no longer matters. The difference is only whether the combined implied probability of the two prices falls below one hundred percent. Below, the position locks a profit and is an arbitrage. Above, it locks a position and costs you the difference.
The calculator shows the combined implied probability explicitly, because it is the number that decides which situation you are in, and it is not obvious from looking at two prices. Two attractive-looking prices frequently sum to well over par.
Hedging at a loss is not a mistake. Converting an uncertain large position into a certain small one is a legitimate choice, particularly when the stake is large relative to what you can afford to lose. It is only a mistake when done in the belief it is free.
Why arbitrage is harder than the arithmetic suggests
The maths is trivial and the execution is not. Prices move between placing the first and second leg, stake limits on the better price are often far below what the arb needs, and the profitable side is usually the one that gets restricted.
Bookmakers identify arbitrage quickly. Accounts get limited to trivial stakes, promotions get withdrawn, and in some cases bets are voided after settlement under terms that reserve that right explicitly. The constraint on arbitrage is not finding it, it is being allowed to keep doing it.
Crypto operators vary widely here. Some are considerably more tolerant than regulated books; others reserve sweeping rights over withdrawal and account closure in terms that almost nobody reads. Before building a strategy on an operator’s prices, the withdrawal and account-closure clauses matter more than the odds do.
Reading the locked profit figure
The guaranteed return is identical whichever outcome occurs, by construction, because that is what the hedge stake is calculated to achieve. The profit or loss figure is that return minus everything staked across both sides.
Return on total stake is the more comparable number, because a locked profit of twenty units on two hundred staked is a very different proposition from the same twenty on two thousand. Arbitrage returns are typically small percentages, which is why volume and account longevity matter more than any individual opportunity.
If the result is negative and you proceed anyway, you are buying certainty and the figure is the price. Knowing that price before placing the hedge is the entire purpose of running the calculation.