Hedging and Locking Profit

MarkIt has no sell button — but you can still lock in profit before resolution by hedging. This page explains how.

The Core Idea

You can hold both YES and NO tokens on the same market. Since one side always resolves to 1.00 USDC and the other to 0, holding tokens on both sides guarantees a payout regardless of the outcome. If you originally bought one side cheaply and the price has moved in your favor, hedging the other side at the new price can lock in a guaranteed profit.

Step-by-Step Example

1. You Take an Initial Position

Market: "Will the Rockets beat the Hornets?"

YES is priced at 0.40 USDC. You buy 100 YES tokens for 40.00 USDC.

2. The Market Moves in Your Favor

Good news for the Rockets — YES price rises to 0.70 USDC, and NO drops to 0.31 USDC.

3. You Hedge by Buying the Opposite Side

You buy 100 NO tokens for 31.00 USDC.

Total spent: 40.00 + 31.00 = 71.00 USDC

4. Your Guaranteed Payout

No matter what happens, you receive 100.00 USDC:

Outcome	YES Payout	NO Payout	Total Payout	Profit
Rockets win	100 × 1.00 = 100.00	100 × 0.00 = 0.00	100.00 USDC	+29.00 USDC
Hornets win	100 × 0.00 = 0.00	100 × 1.00 = 100.00	100.00 USDC	+29.00 USDC

You've locked in +29.00 USDC profit regardless of the outcome.

The Lock Profit Feature

The MarkIt trade form has a built-in hedge calculator. When you already hold tokens on one side, switching to the opposite side shows:

• Your existing position and its current value

• The cost to fully hedge (buy enough of the other side to match)

• Locked profit — the guaranteed P&L in both outcome scenarios

This makes it easy to see exactly what hedging will cost and what it locks in.

Why Not Just Sell?

MarkIt deliberately has no sell function. This design choice:

• Strengthens solvency — No USDC leaves the contract before resolution, guaranteeing the pool can always pay winners

• Simplifies the protocol — No need for sell-side pricing, slippage, or liquidity depth concerns

• Makes hedging the exit mechanism — Holding both sides is economically equivalent to selling, with the same locked-in P&L

The Cost of Hedging

Hedging isn't free. When you buy the opposite side, you pay the current market price plus the spread. The spread includes a dynamic LP fee (which stays in the pool) and a flat 2% protocol fee (sent to the protocol treasury).

If YES = 0.70 and NO = 0.31, the total cost to hold both sides is 1.01 USDC per token. That extra 0.01 USDC is the fee — a small cost for locking in guaranteed profit.

Hedging works best when the price has moved significantly in your favor. If you bought YES at 0.40 and it's now 0.70, you have plenty of room to absorb the spread and still lock in profit. If the price has barely moved, the spread may eat most of your gain.