# hedge¶

## 🏆 Strategy Tier¶

Community strategies have passed the Minimum Voting Power Threshold in the latest Poll and are included in each monthly release. They are not maintained by Hummingbot Foundation but may be maintained by a community member.

## 📝 Summary¶

This strategy allows you to hedge a market making strategy by automatically opening an opposite positions on another perp exchange or spot exchange. Configs like hedge_ratio allow you to customize how much to hedge. Users are expected to run this strategy alongside another market making strategy.

This strategy was the winning submission in the dYdX hackathon.

## 🏦 Exchanges supported¶

• SPOT CLOB CEX
• PERP CLOB CEX

## 🛠️ Strategy configs¶

Parameter Type Default Prompt New? Prompt
value_mode bool True True Do you want to hedge by asset value [y] or asset amount[n] (y/n)?
hedge_ratio decimal 1 True Enter ratio of asset to hedge, e.g 0.5 means 50 percent of the total asset value will be hedged.
hedge_interval decimal 60 True Enter the interval in seconds to check for hedge
min_trade_size decimal 0 True Enter the minimum trade size in quote asset
slippage decimal 0.02 True Enter max slippage in decimal, e.g 0.1 -> 10%
hedge_connector Union[None, ExchangeEnum] None True The name of the exchange connector.
hedge_markets List[str] None True The name of the trading pairs. (For Value Mode, only one market can be entered)
hedge_offsets List[Decimal] [0.0] True Enter the offsets to use to hedge the markets comma seperated
hedge_leverage decimal 1 True Enter the leverage to use for the hedge market
hedge_position_mode Literal["ONEWAY", "HEDGE"] ONEWAY True Enter the position mode to use for the hedge market. (Ensure that the perp connector position mode matches the position mode here)
connector_0 MarketConfigMap True Do you want to monitor connector 0?
connector_1 MarketConfigMap True Do you want to monitor connector 1?
connector_2 MarketConfigMap True Do you want to monitor connector 2?
connector_3 MarketConfigMap True Do you want to monitor connector 3?
connector_4 MarketConfigMap True Do you want to monitor connector 4?
MarketConfigMap: for connector_0 to connector_4?
connector Union[None, ExchangeEnum] None True The name of the exchange connector.
markets List[str] None True The name of the trading pairs.
offsets List[Decimal] [0.0] True Enter the offsets to use to hedge the markets comma seperated

## 📓 Description¶

Approximation only

The description below is a general approximation of this strategy. Please inspect the strategy code in Trading Logic above to understand exactly how it works.

By leastchaos - see original pull request

Summary

This strategy contains 2 mode of hedging.

1. Hedge by amount

The strategy will hedge by amount by calculating the amount to hedge by each asset. The amount of asset to hedge is calculated by the following formula: for each asset in the hedge market pair, amount_to_hedge = sum of asset amount with the same base asset * hedge_ratio + hedge asset amount The amount of asset to hedge must be greater than the minimum trade size to be traded.

1. Hedge by value

The strategy will hedge by value by calculating the amount of asset to hedge. The amount of asset to hedge is calculated by the following formula: amount_to_hedge = sum of asset value of all market pairs * hedge_ratio + hedge asset value The amount of asset to hedge must be greater than the minimum trade size to be traded.

Code Logic:

On every hedge_interval seconds,

1. Checks that all markets are ready.
2. Check and cancel any previous active orders that were not executed
3. Calculates the direction and amount to hedge according to the mode selected (by amount or by value)
4. Places order if the amount meets the min_trade_size

Sample Use Case Examples

• Perform proxy hedging for unshort-able assets with hedge by value mode by hedging the value of multiple different markets using a short-able market which may be correlated.

For E.g, there might be some correlation for some basket of tokens (FEAR, ODDZ, DAFI (random examples only)) with ETH prices. So you can choose to hedge the value of this basket token you hold with a short position on ETH to reduce the inventory risk on the basket of tokens. So when you are market making with this position, it will help you to automatically short a defined ratio on the perpetual market so that if the overall market goes down, part of the loss can be mitigated by the short position in ETH.

• Fixed amount of offset/ hedging of asset

You can set a fixed offset value/amount and the bot will maintain the amount of asset/position you hold at the offset level at every interval.

## ℹ️ More Resources¶

Note

The videos below may be obsolete since they are based on the v0.45.0 version of the strategy