Pending-Order Spot and Futures Hedging by Spread

Summary

The document proposes a spot and futures hedge that places resting orders in separate order books when the spread is attractive. It monitors fills and compares the resulting spot and futures exposures, then opens or closes positions to correct imbalances. As hedged exposure grows, the strategy adjusts the distance of subsequent orders from the best market prices. The goal is to capture a desired spread while potentially benefiting from lower fees associated with pending orders.

A prototype describes depth and position tracking, hedge balancing, and order management. Its stated evidence is limited to a brief test on a simulated venue: orders were placed and canceled frequently, and the author calculates combined spot and futures results as profitable using the reported account figures and ending spot price. This is not robust validation; the document calls the example incomplete and notes that further issues require live-bot treatment. Single-leg fills, execution delays, slippage, and differing spot and futures position accounting remain material risks.

Key ideas

• The design places resting buy and sell orders across spot and futures markets when the spread meets its conditions.
• After fills, it checks both legs and trades to reduce exposure imbalances.
• It adjusts later order spacing as hedged position size changes.
• The reported backtest is brief, with frequent order placement and cancellation, and does not establish live profitability.
• Single-leg execution and delay can leave the account exposed.

Tags

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