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Special points to note:
A Water Hazardis
defined by
either yellow stakes or
a yellow line.  If there
is a yellow line, then
the stakes just
identify the hazard,
the line defines the
actual margin.
The important point
to note is where the
ball LAST crossed
the margin of the
hazard, not first,
but LAST.

A ball is in a WH
as soon as it
touches the margin
of the hazard.

A  Lateral W.H
is defined by
red stakes or lines,
if there is a red
line, the red
stakes just identify
the hazard as
being Lateral, the
line defines the margin of the hazard.
Let us  look at the options for relief, under penalty of one stroke, under Rule 26-1;
a). Play a ball as nearly as possible at the spot from which the original ball was last played (see Rule 20-5); or
b.) Drop a ball behind the water hazard, keeping the point at which the original ball last crossed the margin of the water hazard directly between the hole and the spot on which the ball is dropped, with no limit to how far behind the water hazard the ball may be dropped
In this diagram, the ball first crossed at “A”   and had it not spun back into the water,  one of the two options would have  been to  have dropped a ball back as far as the player liked keeping Point “A” in line with the flag. So the player would be dropping it almost where he was standing .
However, the ball spun back into the water so it LAST crossed  the margin of the hazard
at point  “B”. Therefore Point “B” is the reference point and the ball must be dropped on a
line from the flag to that point or beyond, again going back as far as the player likes.
If the ball is in a Lateral W.H then the player has the same options a) & b) as described above PLUS:-
c.)  An additional option available   -  drop a ball outside the water hazard within two club-lengths of a
(i) the point where the original ball last crossed the margin of the water hazard   -   see  3 in illustration  
OR
(ii) a point on the opposite margin of the water hazard equidistant from the hole. -    see 4 in illustration
                                                          Provisional Ball
.If a ball is heading in the direction of a WH but you cannot see exactly where it comes to rest,  you may only take a provisional ball if you are certain it has not actually gone into the hazard but that it may be lost in reeds or rough outside the hazard.  If there is any doubt as to whether the ball may have entered the WH then you can only proceed under R 26-1       as in a)  b) or c) above.   If you play a provisional ball when you think it might have gone into the WH, that ball  immediately becomes the ball in play irrespective of where  you find your original ball