DDH Instruction
Delicate dynamic delta hedging to minimize hedging costs.
Last updated
Delicate dynamic delta hedging to minimize hedging costs.
Last updated
Dynamic Delta Hedging or DDH is a very useful tool for traders to manage risk automatically. Basically, by using DDH, traders can limit the Delta exposure of the account within a set range, thus controlling the overall risk of the portfolio.
You can first select DDH on the left side and then choose the desired token for hedging. Note in order to activate Auto DDH, you have to satisfy some specific requirement.
Once you click the the Active Auto DDH button, read the disclaimer carefully and if you agree, you can then activate Auto DDH function. Note that the function will be turned off automatically if you do not log into your account in 7 days.
Within the setting interface, the top number is showing your account delta we pull directly from the exchange. The checking frequency for the Delta is less than 5 seconds. Then Pro mode is recommended for the setting for more customizable settings.
You will first need to enter to Upper and Lower Limit, where the hedging mechanism would be triggered once the account Delta touch either limit. Then you will need to enter the Target. Lastly around such target, you can set Upper and Lower Tolerance Level, which your account Delta would be brought to, once DDH is triggered. Note all the limit and threshold does not have to be symmetric and can be adjusted at your needs.
If during the hedging process, thanks to the market movement, the account Delta goes back within the tolerance level, active order will be cancelled and the process will stop.
Essentially, for the set threshold, once the account Delta hit the red zone (Delta limit), our algo will use the futures to bring the account Delta to the green zone (Delta Tolerable Range).
Next, you can set the DDH Order details. Currently, we only support perptual futures as DDH instrument. For the Order Price, there are 3 options -
The first one starts with the most conservative pricing - limit order placed at best bid (for buy) and best ask (for sell), and gradually move to market price if all the prior limit orders are not filled, within the set time frame. This will greatly avoid the taker orders and fees, but could take longer and be more expensive as price moves further away.
The second one would start at mid price as limit order, and then move to market order if prior orders are not filled. This is easier to be fullfilled than the first method.
The last one would be the fastest, and execute the order as market order right away. And this is also the pricing mechanism for Lite mode. This method hedges the Delta exposure most quickly, but could result in higher fees as a taker.
In addition, you can enter Each Order Quantity. If the Delta exposure is greater than Each Order Qty, then each order will be placed at preset order quantity; if Delta exposure is smaller than Each Order Qty, then the order will be placed at the exposure level. To be more specific , assuming Delta exposure is 2,
If Each Order Qty is set at 0.5, then there will be 4 orders quoted at size 0.5 sequentially.
If Each Order Qty is set at 5, then there will be only 1 order quoted at size 2.
Finally, you will select preferred Open Order Timeout, which is the frequency of cancelling/replacing order if the active order is not filled at prior limit price. After cancellation, new order will be placed closer to the market price till it becomes a market order, based on the chosen time frame.
After activating DDH function, we advice you to subscribe @SignalPlusTradingBot through Telegram. After subscription, when DDH is triggered or orders are filled, system will automatically send you notifications on Telegram.
First is to click the Telegram icon on the top right of the entire page. Then simply click Send to Telegram button and paste subscription key to your chat with @SignalPlusTradingBot. The bot will reply 'Subscribed' as a sign of successful subscription.
