1. What is hedging?
According to the definition of Baidu Encyclopedia, hedging refers to buying (or selling) the futures contract of the same commodity in the futures market in the opposite direction to the spot market, and then no matter how the price of the spot supply market fluctuates, it can finally achieve the result of losing money in one market and making profits in another market, and the amount of loss is roughly equal to the amount of profit, thus achieving the purpose of avoiding risks. Simply put, it is the reverse operation of the same position in the spot market and the futures market at the same time. Hedging is widely used in traditional financial markets (stocks, futures, foreign exchange, etc. ), but the participants are mainly enterprises or institutional investors.
Retail investors rarely do hedging, because whether it is speculating in stocks or futures, or speculating in coins or making contracts, making money is the main purpose, and what money can be earned after locking in value fluctuations. However, the crowdfunding of currency circle projects is mostly based on money (mostly BTC, ETH, EOS), and most of them have lock-up period requirements. If there is a bull market, everyone doesn't care much about currency fluctuations, because the mainstream currency is definitely rising, so there is no need to avoid the risk of rising. In the current bear market, it is not allowed to fall by 10 points for one or two days, and it is necessary to lock in the market value through hedging and other operations.
2. How to use lever reasonably?
The above is the simplest hedging, with the same long and short positions, but the utilization rate of such funds is very low. In order to improve the utilization rate of funds, we must use the leverage of futures market to a certain extent. In addition, the important difference between the money market and the traditional financial market is that deposits are also paid in money, and your deposits themselves have the risk of currency fluctuations, which should also be added to your multi-positions. For example, I hold 2000 EOS for mining. If I open a double-leveraged short position, it means that my margin account must also hold 2,000 EOS, and finally it is actually a long position of 4,000 EOS+a short position of 4,000 EOS, so as to completely hedge the risk of EOS currency fluctuation.
It is not difficult to find that in this case, the author's funds for mining can only stand at half of the total funds, and the utilization rate is very low. But to be on the safe side, there is no way, because it is hard for anyone to say how much EOS will fluctuate during the mining period. If you want a high capital utilization rate, you can appropriately increase the leverage, such as 80% spot EOS, so you should open it. In order to improve the utilization rate of funds, can we increase the leverage at will? Obviously not, the premise of hedging is that your short position will not be exploded. The author is timid this time, and the double leverage and double explosion of short positions (EOS rises to $7) should not be too big. The following table gives the proportion of funds hedged under 2- 10 leverage. The first line is the proportion of funds used by the author. If you have sufficient funds on hand or don't want to invest too many positions in the whale, you can choose twice the leverage, and the risk of short positions is small. If you are more radical, or want to improve the utilization rate of funds, you can consider 3 times or 5 times leverage.
Finally, it should be noted that if you open a short contract on OKEX, it can be completely hedged in theory, because EOS can be used as a margin. However, in view of OKEX's various misdeeds, the author chose Bitmex, which is more reliable. However, BTC can only be used as a deposit on Bitmex, and the fluctuation of BTC and EOS will be obviously different, so the risk of the deposit part cannot be completely hedged.