Portfolio Hedge Calculator
Enter your portfolio value, its beta, and the level of the index option, future, or ETF you hedge with to see how many contracts offset your market exposure.
Size a hedge
Market value of the holdings you want to protect, from $1 through $1 trillion.
Weighted-average beta vs the index you hedge with; 1.0 moves with the market.
The level of the index option/future or hedge ETF.
Hedging $500,000.00 with a beta of 1.2 means offsetting $600,000.00 of market exposure — 1.20 contracts exactly, so 1 whole contract covers $500,000.00 and leaves $100,000.00 unhedged.
- Beta-adjusted exposure
- $600,000.00
- Exact contracts
- 1.20
- Whole contracts
- 1
- Hedge notional
- $500,000.00
- Left unhedged
- $100,000.00
How the hedge size is calculated
This is the standard beta-weighted hedge from the derivatives literature (Hull). Your portfolio’s dollar value is scaled by its beta to get the market exposure that actually moves with the index, then optionally scaled by a hedge ratio if you only want to offset part of it. Dividing that exposure by the notional value of one contract — the index price times the contract multiplier — gives the number of index puts to buy or futures to short. Because you can only trade whole contracts, the exact figure is rounded and the leftover exposure is reported.
Contracts = (Portfolio × Beta × Hedge ratio) / (Index price × Multiplier)- Portfolio
- Market value of the holdings being hedged
- Beta
- Weighted-average beta vs the hedge index
- Hedge ratio
- Share of the exposure to offset, 100% for a full hedge
- Index price
- Level of the index option, future, or hedge ETF
- Multiplier
- Notional per index point, such as 100 or 50
Keep in mind that a hedge caps your upside too — if the market rallies, gains on the portfolio are offset by losses on the hedge. And because beta drifts over time, any beta-weighted hedge is approximate rather than exact.
$500,000 portfolio, beta 1.2, index at 5,000
Suppose you hold a $500,000 portfolio with a beta of 1.2 and hedge with an index at 5,000 using a contract multiplier of 100. The beta-adjusted exposure is $500,000 × 1.2 = $600,000. One contract carries 5,000 × 100 = $500,000 of notional, so the exact hedge is $600,000 ÷ $500,000 = 1.20 contracts. Rounding to 1 whole contract hedges $500,000 of exposure and leaves $100,000 unhedged.
This is an educational calculation based only on the values you provide. It does not look up live prices, and it is not investment advice.
What this calculator assumes
- Beta stays constant over the life of the hedge — in practice it drifts, so hedges need periodic rebalancing.
- Index options and futures hedge market (systematic) risk only, not stock-specific risk in individual holdings.
- Option hedges also carry premium and theta (time decay) costs that are not modeled here.
- Only whole contracts can be traded, so the exact hedge is rounded and the residual exposure is reported.
- No live price data is used — every figure comes from the values you enter.
Portfolio hedging FAQ
Puts or futures — which should I use?
Index puts work like insurance: you pay a premium up front, your maximum cost is defined, and you keep the upside if the market rallies. Futures are symmetric and cheap to carry — no premium — but they give up the upside, because gains on the portfolio are offset by losses on the short futures position.
Why beta-adjust instead of dollar-matching?
Because portfolios do not move one-for-one with the index. A portfolio with a beta of 1.4 tends to fall about 1.4× as much as the index in a sell-off, so matching dollars alone would underhedge it. Scaling the portfolio value by beta sizes the hedge to the exposure that actually moves with the market.
What about hedging single stocks?
Index hedges leave idiosyncratic (stock-specific) risk in place — a company can still miss earnings while the index is flat. That risk is diversifiable across many holdings, or it can be hedged directly with single-name options on the stock itself.
Sources and review notes
- CME Group — education on hedging with equity index futures
- John C. Hull, Options, Futures, and Other Derivatives, Pearson — hedging with index futures
Methodology last checked Jul 16, 2026. Formula implementation is covered by deterministic unit tests. No financial professional review is claimed yet.