How Does a “Strip Hedge” Differ from a “Stack Hedge”?
Both are strategies for hedging a series of future exposures. A strip hedge involves using a sequence of futures contracts with different, consecutive expiration dates to match the timing of a series of future exposures.
A stack hedge involves using a large number of futures contracts all expiring in the same near-term month to hedge a series of exposures over multiple future periods. Strip hedges are generally preferred for lower basis risk.
Glossar
Strip Hedge
Construction ⎊ A strip hedge, within cryptocurrency derivatives, represents a dynamic options strategy employed to mitigate directional risk while simultaneously generating income, typically involving the sale of out-of-the-money put options against an underlying asset ⎊ often a cryptocurrency ⎊ held in portfolio.
Hedge
Mitigation ⎊ A hedge, within cryptocurrency and derivatives markets, represents a strategic position established to offset potential losses stemming from adverse price movements in an existing asset or portfolio.