Introduction
This guide explains how to hedge spot Bitcoin Cash using perpetual futures contracts to reduce price risk. By opening a short perpetual position sized to the spot holding, traders can offset losses when BCH price falls. The method relies on the perpetual’s funding rate mechanism to keep the contract price close to the spot index.
Key Takeaways
- Hedge spot BCH by shorting a perpetual futures contract of equivalent notional value.
- Calculate the hedge ratio using the spot position size divided by the perpetual contract’s multiplier.
- Monitor funding rates; a positive rate adds a small cost, a negative rate provides a rebate.
- Adjust the hedge as the spot holding changes or as funding dynamics shift.
- Be aware of counterparty, liquidity, and model risks before implementation.
Leave a Reply