Maker-Order Spot–Futures Hedging with Rebalancing
Summary
The document proposes hedging spot and futures exposure with paired limit orders instead of taking existing quotes when a price spread meets a threshold. It compares the futures and spot order books, places orders on opposite sides when the spread is favorable, and adjusts their distance from the best quotes as the accumulated hedge position changes. The system monitors fills and account positions; if only one leg executes, it can either open the offsetting exposure or close the excess, according to a configured balancing mode. It also cancels and replaces orders when market conditions move away from the intended placement.
The author presents a code prototype tested only in an OKEX V5 simulated environment and includes a backtest example with frequent order placement and cancellation. The reported account results are a futures loss of 0.01666 ETH and spot profit of 842.23758 USDT; the author converts the futures loss using an end-period spot price of 4252 USDT and describes the combined outcome as positive. This limited backtest does not establish live profitability. The article notes that maker orders may not fill and can leave one leg exposed, and says further real-market details remain unresolved.
Key ideas
- Paired limit orders can seek a favorable spot–futures spread while paying maker fees if filled as intended.
- Order placement distance is adjusted according to the current hedge position and observed order books.
- Monitor fills and rebalance unmatched exposure by either adding the missing leg or reducing the excess.
- Frequent cancellation and replacement are part of the prototype’s backtest behavior.
- The simulated example is limited evidence; missed fills and single-leg exposure remain important risks.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.