🛡️📉 Ever hold spot and dread a dip? I've been there, wishing I knew how to protect my bag. Let's talk simple hedging with futures, something I wish I learned before blowing up that $600.
Say you hold 1 BTC spot, currently at $70,000. You're anticipating short-term volatility but don't want to sell. To partially hedge, you open a short futures position. If you short 0.1 BTC, and BTC drops 10% ($7,000), your spot still loses $7,000, but your short futures position gains $700 (0.1 BTC * $7,000). You've cushioned the fall! You size your short position to match the level of risk reduction you want.
The primary cost is funding fees. As a short hedger, you'll either pay or receive these fees every 8 hours. In a predominantly bullish market, shorts often *receive* funding, which can be a small...
Say you hold 1 BTC spot, currently at $70,000. You're anticipating short-term volatility but don't want to sell. To partially hedge, you open a short futures position. If you short 0.1 BTC, and BTC drops 10% ($7,000), your spot still loses $7,000, but your short futures position gains $700 (0.1 BTC * $7,000). You've cushioned the fall! You size your short position to match the level of risk reduction you want.
The primary cost is funding fees. As a short hedger, you'll either pay or receive these fees every 8 hours. In a predominantly bullish market, shorts often *receive* funding, which can be a small...