Today I share how to hedge the losses from the 3 BNB purchased in TGE, how to set up the contracts.

#币安Alpha上新 $BNB

I participated in many TGEs, and I remember the first time I participated in TGE in April, I bought 3 BNB at a high price, operated until late at night, and sold for less than 30 USD. After deducting the money for the new coin and the loss from the drop in BNB, I ended up losing money.

During the TGE event, it generally drives the purchase of BNB, and BNB will have a slight increase. After the TGE event ends, everyone will sell BNB again. So this fluctuation will make TGE, which originally had little profit, even worse. At that time, the sentiment in the community was that the returns from participating in TGE were not as good as directly shorting BNB.

For a low-risk speculator 😂, high-risk matters should be avoided as much as possible. The best way is to buy BNB while hedging against the most short BNB, so you can ignore the fluctuations of BNB and achieve low-risk profits from TGE.

So I bought 3 BNB in the spot market to participate in TGE. How should I set up the BNB contract? Is it 3x leverage to sell 1 BNB?

Sounds like it, I operated like this at that time, buying 3 BNB = 3 * 1 BNB, this seemed perfectly correct, 🤣

But later I found that it was not as I thought. The profits from the contract could not fill the losses in the spot market, only covering 1/3 of the spot losses.

So how should it be set up?

1 Basic logic of hedging

- You hold 3 BNB in the spot market. If the price of BNB drops, your spot assets will lose value.

- By shorting BNB in the futures market, you can profit when the price drops, thereby offsetting the losses in the spot market.

2 Calculate the hedging position

- Spot position: 3 BNB.

- Goal: Establish an equivalent short position in the contract market to offset the losses in the spot market with the profits from the contract.

In the Binance contract trading interface, set the number of BNB to buy and sell. This value is the position. Short/sell means a short position.

You only need to set short position = spot position to hedge. The multiplication of leverage affects the risk.

Therefore, to hedge 3 BNB in the spot market, you should sell 3 BNB, fixing at 3.

Then the higher the leverage, the less margin is needed; the lower the leverage, the more margin is required. Important note: High leverage means high risk.

Calculation formula

Spot position = Contract position

I don't have that much margin, how should I set the leverage?

Margin calculation formula:

Position size ÷ Leverage multiple = Required margin

To fully hedge against the risk of the spot price of 3 BNB dropping:

- Need to short 3 BNB in the futures market (nominal value equal to the spot).

- If using 3x leverage, you only need to invest **position size (3 BNB) ÷ leverage multiple (3x) = 1 BNB margin** to control a short position of 3 BNB.

3 Order Steps

1 Open a short position:

- Enter the contract trading interface and select the BNB/USDT trading pair.

- Choose 3x leverage.

- Place an order to short, with a position size of 3 BNB (using 1 BNB as margin).

2. Confirm the hedging ratio:

- Ensure that the nominal value of the futures short position (3 BNB) is equal to the spot position (3 BNB).

3. Funding rate issue:

- The funding rate for the bnb/usdt contract is 0, which can be ignored.

Quiz

In the end, due to insufficient funds, I didn't have $658 (price on 25-07-01) to use as margin, and I want to use 6x leverage. How much margin should I prepare at this time?