Hedging Market-Maker Inventory from Account Balance Changes

Summary

This document describes a simple inventory hedge for a small trading platform. A recurring process reads account balances, compares each coin’s current total—including frozen funds—with recently stored balances, and sends trades to offset the change on Huobi. Positive balance changes trigger sells, while negative changes trigger buys. The process also records balance and hedge history in SQLite and sends administrator notifications through messaging services.

The material is an operational outline with sample code, rather than a tested trading analysis. It does not specify how to map assets to hedge instruments, account for valuation changes, handle fees or failed orders, or verify that a hedge completed. In particular, balance changes may reflect deposits, withdrawals, or other activity as well as trading inventory, so the method can create unintended trades without additional controls. No backtest or risk results are supplied.

Key ideas

• The process estimates inventory changes by comparing current account balances with stored prior balances.
• It offsets positive coin balance changes with sells and negative changes with buys on another exchange.
• SQLite stores balance and hedge records, while messaging integrations notify administrators.
• Balance changes can have causes other than trading, so the method may hedge deposits or withdrawals unintentionally.
• The document supplies no performance evidence or detailed controls for execution failures, fees, or hedge sizing.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.