What are hedged positions

WHAT IS A HEDGED POSITION

When buying positions there is a chance you have purchased both possible outcomes of a market.  When this occurs, it means you have successfully hedged a position!  This basically means you are guaranteed to receive some of the position value after the event / market settles.

There are 2 types of hedged positions:

Positive Hedge:  The potential winnings of your hedged positions is greater than the total quantity of the positions

Negative Hedge:  The potential winnings of your hedged positions is less than the total quantity of the positions.

In the event you have successfully created a hedge, you will be offered an opportunity to get cash back right away and your positions will be modified based on the hedged amount and the cash you are able to retrieve.

POSITIVE HEDGE EXAMPLE

CREATING A POSITIVE HEDGE

Let's say the Minnesota Vikings are playing the Green Bay Packers.  For the Winner market, there are 2 possible graded outcomes: 

- Vikings To Win

- Packers To Win

* Draw's are considered no-bets and all money is returned

Now it is a few days before the match and you decide you like the Vikings to win.  You successfully purchase a Vikings To Win position at +110 (47.62%).  Your overall position on the Winner market is now weighted to the Vikings!

Current Positions:

After some news, you decide you are more comfortable with the Packers winning and you are able to pick up a Packers To Win position at +110 (47.62%). Your overall position will now change.

Current Positions:

At this point you now have a position on both possible outcomes and have successfully created a hedge of $21.00.  If these positions are graded, then no matter what you will receive $21.00!  This is known as a Positive Hedge because your guaranteed graded payout ($21.00) is higher than your total position in the market ($20.00).  So you successfully gained $1 no matter which outcome is graded.

CASHING OUT A POSITIVE HEDGE

Since you are guaranteed a payout on your hedged positions, we offer the ability to get that cash before the event / market is graded.

In order to calculate the amount of cash that can be returned prior to an event settling, we need to understand how much you would be paid for each possible outcome (including a no-bet):

Since we do not yet know what the actual outcome will be, the total amount of cash that can be retrieved immediately is equal to the lowest payout amount.  In this case, the lowest amount you would receive is if the event is not graded (no-bet / draw).  

When cashing out you will receive payments as follows:

NEGATIVE HEDGE EXAMPLE

CREATING A NEGATIVE HEDGE

Let's say the Minnesota Vikings are playing the Green Bay Packers.  For the Winner market, there are 2 possible graded outcomes: 

- Vikings To Win

- Packers To Win

* Draw's are considered no-bets and all money is returned

Now it is a few days before the match and you decide you like the Vikings to win.  You successfully purchase a Vikings To Win position at -110 (52.38%).  Your overall position on the Winner market is now weighted to the Vikings!

Current Positions:

After some news, you decide you are more comfortable with the Packers winning and you are able to pick up a Packers To Win position at -110 (52.38%). Your overall position will now change.

Current Positions:

At this point you now have a position on both possible outcomes and have successfully created a hedge of $21.00.  If these positions are graded, then no matter what you will receive $20.00!  This is known as a Negative Hedge because your guaranteed graded payout ($21.00) is lower than your total position in the market ($22.00).  So although you have hedged a potential larger loss, you are guaranteed to lose $1.00 no matter which outcome is graded.

CASHING OUT A NEGATIVE HEDGE

Since you are guaranteed a payout on your hedged positions, we offer the ability to get that cash before the event / market is graded.

In order to calculate the amount of cash that can be returned prior to an event settling, we need to understand how much you would be paid for each possible outcome (including a no-bet):

Since we do not yet know what the actual outcome will be, the total amount of cash that can be retrieved immediately is equal to the lowest payout amount.  In this case, the lowest amount you would receive is if the event is graded ($21.00).

When cashing out you will receive payments as follows: