Hedging with Tradoor (Perpetual futures)

An alternative way to hedge the downside risk of price decrease on your LP position using lending platforms is to short the volatile asset via decentralized perpetual futures on Tradoor, which allows leverage up to x100.

This method is less capital-intensive compared to using lending, as DeFi lending requires overcollateralized loans. With short-selling on Tradoor, you can use margin as collateral, meaning you don’t need as much initial capital to open your position.

This makes it a more flexible option for hedging, especially if you want to avoid locking up significant funds in collateral. However, the downside of this approach is the risk of liquidation. If you’re using a high leverage, a small price movement against your position can lead to a liquidation, causing you to lose your collateral.

Example

You have $15,000 and want to open a position in the GRAM/USDT pair on TONCO DEX. Assuming the APR for a GRAM/USDT pair is 100% and Gram (prev. Toncoin) is traded at 5 USDT.

You put 1500 GRAM and 7,500 USDC into a liquidity pool on TONCO DEX. Let's say you put range between 4.5 and 5.5. As long as the GRAM price stays within your designated range, you’ll earn trading fees.

One day, the price of GRAM drops beyond your range to 4 USDT. You end up with a position consisting of ≈ 3,060 GRAM (as the ratio changes along the way, you end up with slightly more than 2x GRAM) and 0 USDT. You are now fully exposed to the GRAM price and experience permanent loss.

After selling the tokens received for providing liquidity for 30 days while being in-range, the cumulative yield stands at 1,232 USDT (calculated as 7,500 * 2 * 100% / 365 * 30). You decide to stop providing liquidity.

If you sell the 3,060 GRAM at 4 USDT each and combine the proceeds with the 1,232 USDT, you’ll see a total loss of 1,528 USDT ((3,060 * 4 + 1,232) - 7,500 * 2) due to impermanent loss.

Hedging vs. No Hedging

• Without Hedging

If you had opened the original position without any hedging ($15,000: 7,500 USDT + 1,500 GRAM), you would have ≈3,060 GRAM and 0 USDT. If you decide to lock in your loss and withdraw 3,060 GRAM, you would receive:

— 3,060 * 4 = $12,240 (if the price of GRAM dropped to $4)
— Trading fees ($1,232 from the example above)

The total would be:

$12,240 + $1,232 = $13,472, a -10.18% loss

• With Hedging on Tradoor

We use 5,000 USDT as collateral and open a short position for 1,000 GRAM (assuming GRAM = $5). No leverage is used in this example, but it can be adjusted according to your risk tolerance.

For a short hedge, set the stop-loss at the upper bound of your LP range ($5.5 from the example above) to cap losses if price rises. Optionally set a take-profit at the lower bound ($4.5) to lock in hedge gains as your LP exits the range on the downside.

After the GRAM price drops to $4 you withdraw ≈2,040 GRAM from TONCO. But since TON’s price dropped, the short position you opened on Tradoor became a profitable trade for you. You should profit 1,000 USDT (1,000*1) after closing the short position and withdraw initial 5,000 USDT collateral back.

You have to pay $4.5 service fee (0.09% of the position size).

The total would be:

— $8,160 (from the sale of 2,040 GRAM at $4)

— $1,000 (profit from short position)

— $5,000 (collateral returned)

This gives you:

$8,160 + $1,000 + $5,000 = $14,160, plus:

— Trading fees ($821.92)

Grand total:

$14,160 + $821.95 = $14,977, a -0.15% net loss

(hedge nearly neutralizes the downside vs. −10.18% unhedged.)

Step-by-step strategy for hedging

1. Open a Short Position

Use 5,000 USDT as collateral on Tradoor to open a short position for 1,000 GRAM (assuming GRAM = $5). You can place a stop loss at the minimum of your price range to protect against price increases.

2. Open LP position on TONCO

Provide liquidity with $5,000 USDT and 1,000 GRAM on TONCO DEX.

This brings your total position value to $10,000.