Glossary › Hedging
Checked September 25, 2026 · 4 sources · plain-English definition, not financial advice
Hedging: Buying an event contract that pays if something bad for you happens, to offset part of a loss elsewhere, such as rain ruining a planned trip.
The CFTC glossary describes a hedger as a market participant who takes positions in a derivatives market opposite to a risk held elsewhere, to minimize the risk of loss. The CFTC's prediction market guide gives the example of a citrus farmer buying a weather event contract to hedge against losses from a sudden freeze. Kalshi's help center describes hedgers as people with an outside risk, such as inflation, interest rate or hurricane risk, who are often willing to pay a slight premium for protection.
Worked example: you hold $500 of nonrefundable tickets to an outdoor game and worry about a washout. If a Kalshi market on rain that day trades at 20¢, buying 300 Yes costs $60 plus fees and pays $300 if it rains, offsetting part of the loss; if it stays dry, the $60 is the cost of your protection. Kalshi's help center uses a similar example of a trip to a game in Chicago.
What to check: that the contract's settlement source and threshold match your real risk (rain at an airport station is not rain at the stadium), that you can afford to lose what you pay, and that the hedge is sized to the loss rather than larger.
Kalshi position sizing worksheet · Kalshi payout calculator
Checked September 25, 2026. Kalshi changes fees, rules, funding options and limits; the market's rules, the order ticket and Kalshi's help center are the final word.
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