I would like to address a common question a few users have brought to my attention ie. "how do I actually hedge on your platform?"

Example:

You own 1 bitcoin at an average price of $600.25 and would like to hedge your downside risk.

Step 1: Determine how much a $0.01 is worth in satoshi for that price level.

Set $600.25 equal to 1 bitcoin, divide both sides by $600.25 to determine how much $1 is worth in satoshi.

Divide both sides again by 100 to determine how much $0.01 is worth in satoshi.

$600.25 = 1 BTC
1 = 1/600.25 BTC
0.01 = 1/600.25/100 BTC

so 1 penny change is worth roughly ~ (1/600.25)/100 or 1666 satoshi. (this ratio is not static; if price moves down-- you will need to short more to stay hedged; if price moves up -- you will need to be short less to stay hedged.)


Step 2: As the BTC.USD contract has a minimum tick increment of $0.01 and a minimum tick value of 1/Satoshi per tick; you must sell 1,666 contracts to be hedged.

The margin required is constant at $100USD (for the time being) per bitcoin hedged. THUS, your effective leverage will change with price.

IF BTC/USD spot rate is $100, it will take you $100 in bitcoin to hedge. (effective leverage 1:1)

IF BTC/USD spot rate drops below $100, to $50, your leverage is still $100 (effective 1:2)

IF BTC/USD spot rate drops to $25, your leverage is still $100. (effective 1:4).

Margin rates will be adjusted for the BTC.USD contract, whereas the margin rates for the log contracts will always be constant (at 25 satoshi per contract) as the settlement prices are less volatile.



Questions? Comments? Concerns?

Let me know!