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What Is a Perfect Hedge?

A perfect hedge is a theoretical strategy that completely eliminates all risk of loss from an existing position. It involves taking an offsetting derivative position of equal size and maturity to the underlying crypto holding.

In practice, a perfect hedge is difficult to achieve due to factors like basis risk, transaction costs, and the inability to find perfectly matching derivative contracts.

When Is a Crypto Call Option Considered to Be at the Break-Even Point?
How Does the Net Premium Affect the Maximum Loss Amount?
What Is a “Zero-Cost” Collar and How Is It Achieved?
What Is the Impact of a Net Debit versus a Net Credit on the Collar’s Breakeven Point?