Every matched bettor has typed numbers into a lay stake calculator: back stake, back odds, lay odds, commission. Out comes the lay stake, the liability and the qualifying loss. This page runs the same reasoning on a prop challenge, so you can see which number plays which role, and where the sizing of a hedge on your broker works differently from a lay.
If the prop account hits maximum drawdown, the hedge on your own broker is sized so the challenge fee is designed to come back. In Margin mode that scenario is also where the surplus is designed to land. This is not a refund from the firm, and it is not a guarantee: it depends on configuration, capital, and friction (erosion).
The lay stake, as you already know it
For a qualifying bet with no free bet involved, the standard formula is:
Lay stake = (back stake × back odds) ÷ (lay odds − commission)
Example values only. Back 10 at 3.0, lay at 3.1 with 2% commission:
- Lay stake: (10 × 3.0) ÷ (3.1 − 0.02) = 9.74
- Liability on the exchange: 9.74 × (3.1 − 1) = 20.45
- If the back bet wins: +20.00 at the bookmaker, −20.45 on the exchange, so −0.45
- If the lay wins: −10.00 at the bookmaker, +9.55 on the exchange after commission, so −0.45
Either way you lose 0.45. That is the qualifying loss: the price of turning an uncertain result into a known one.
The same roles on a prop challenge
| In the lay calculator | On a prop challenge |
|---|---|
| Back stake | The challenge fee, the only cash you pay the firm |
| The event that settles the bet | The prop account reaching its floor (maximum drawdown) or its targets |
| Lay stake | The size of the opposite position ARMOUR opens on your broker |
| Liability | The real capital your broker account needs to hold that position |
| Qualifying loss | Erosion: spread, commission, swap and slippage on both accounts |
Why the hedge is not 1:1
A lay stake is close to the back stake because both legs pay out in the same money on the same result. On a prop challenge the two legs move different money. The prop account moves virtual money: a 50,000 account that falls to a 45,000 floor has lost 5,000 that was never yours. The broker account moves real money. Mirroring the prop position 1:1 would put 5,000 of real risk against a 300 fee.
So the hedge is sized against the fee, not against the account. The arithmetic behind the idea, before erosion and with example values only:
- Challenge: 50,000 account, 300 fee, 10% maximum drawdown. The floor is 5,000 away.
- To bring back 300 over a 5,000 move, the broker position has to gain about 300 for every 5,000 the prop account loses: roughly 6% of the prop position's size.
- Erosion then comes off that figure, on both accounts, on every trade.
That ratio is only the mechanism. The size ARMOUR actually uses depends on the mode and the configuration of the cycle, and it is not a number to copy from this page.
Where the comparison breaks
- The liability is not fixed. An exchange liability is known before you place the lay. A broker position is leveraged, so a fast market can cost more than planned, and you can lose some or all of the capital on the broker.
- The losing leg can be the broker. If the prop account climbs toward its targets, the broker leg loses real money. That path is meant to be paid by certificates, not by the broker, and certificates are not guaranteed.
- The legs do not settle together. Prices move between the trade on the prop account and the hedge on the broker, markets gap, and a hedge can fail to open.
- Scaling and Margin size differently. In Scaling the hedge is designed to bring the fee back at the floor, or a thin surplus. In Margin the hedge is larger, the broker account needs about twice the capital, and the surplus is designed to land at the floor.
- The firm's terms decide. Many prop firms forbid opposite positions across accounts or providers, including on a personal account at another broker. If your firm's terms forbid it, this is not for that challenge.
