At the request of Polly Camacho d3]g
Working with futures on the same position (Long and Short at the same time) is a hedging strategy, when a trader tries to control risks and earn on both the growth and the fall of the asset price. Such a strategy requires careful planning and competent risk management.
I will give an example with BTC futures at 93,949 USD. (price is current at the time of writing).
Step 1: Choosing a Futures Contract
You choose a BTC futures contract with an appropriate expiration date.
Step 2: Market Assessment
By analyzing the market, you expect a possible short-term correction, but in the long term, the price may rise again. You decide to simultaneously open Long and Short positions to hedge risks.
Step 3: Opening Positions
1. Long position: Buy 1 contract on BTC at 93,949 USD, expecting growth.
2. Short position: Sell 1 contract on BTC at the same price of 93,949 USD, expecting a decline.
Step 4: Setting Orders
1. Stop-loss: For Long set at 92,000 USD, for Short — set at 95,000 USD.
2. Take-profit: For Long set at 97,000 USD, for Short — at 90,000 USD.
Step 5: Position Management
Regularly check the market, adjust orders if the market situation changes.
Step 6: Closing Positions
1. If the BTC price reaches 97,000 USD, close the Long with a profit.
2. If the price drops to 90,000 USD, close the Short with a profit.
Step 7: Analyzing Results
If both positions are profitable, you earn on both rise and fall. If both positions are losing, you lock in losses on both trades.
Calculations for the example 👆👇
1. Initial Data:
Current BTC price: 93,949 USD.
Opening a Long position at 93,949 USD.
Opening a Short position at 93,949 USD.
2. Orders:
Long: Stop-loss at 92,000 USD, take-profit at 97,000 USD.
Short: Stop-loss at 95,000 USD, take-profit at 90,000 USD.
1. Example of a profitable trade:
Long position:
Buying at 93,949 USD.
Closing at 97,000 USD.
Profit on 1 BTC: 97,000 - 93,949 = 3,051 USD.
Short position:
Selling at 93,949 USD.
Closing at 90,000 USD.
Profit on 1 BTC: 93,949 - 90,000 = 3,949 USD.
2. Example of a losing trade:
Long position:
Buying at 93,949 USD.
Closing at 92,000 USD.
Loss on 1 BTC: 93,949 - 92,000 = 1,949 USD.
Short position:
Selling at 93,949 USD.
Closing at 95,000 USD.
Loss on 1 BTC: 95,000 - 93,949 = 1,051 USD.
Step 8: Improving Strategy
Analyze trade results, improve your strategy, and apply the acquired knowledge for future trading.
Thus, the Long and Short strategy on futures helps traders minimize risks in high market volatility, but requires careful monitoring of margin and orders.