To learn what hedging is and why you would ever want to hedge, see What Does Hedging Your Bets Mean?
Prevent A Loss By Hedging
To win back your stake in a loss, divide your original stake by the price of the other side of the hedge and bet that amount.
You bet 100 on a futures bet with a price of 10.00, now you want to hedge out with the other side at a price of 1.60.
100/1.60 = 62.5
You should bet 62.5 on the other side. If your bet loses, you still win back your original stake, making the wager risk free.
Win The Maximum Amount By Hedging
To ensure you win the maximum amount on your hedge every time, use the following formula:
x = (p+b)/r
x = amount you should bet on hedge
p = the profit you stand to make on the first bet
b = the first wager you made
r = (decimal) price of the second wager
To calculate how much you stand to win, subtract the amount you placed on the hedge from the profit you stand to make on the first bet:
p – x = guaranteed return
You bet 100 on a futures bet with 10.00 odds, now you want to hedge out with the other side at 1.50 odds.
p = 900
b = 100
r = 1.5
x = (900+100)/(1.5)
x = 666.67
With this hedge you stand to make 900-666.67 = 233.33. That means you get 233.33 pure profit no matter what the outcome is!