LP Hedge Calculator Training

https://vimeo.com/1233178267/d0506d9d05

Feature Quick-Reference:

• Total Capital Mode: Define your total budget and the calculator splits it optimally between LP capital and hedge margin.

• Four Hedge Types: Below-Range Protection, Breakeven at Lower, Partial Hedge, and Optimal Protection — each designed for a different market bias.

• Leverage Toggle: Adjust hedge leverage (1x–3x) to balance capital efficiency against liquidation risk.

• Time-to-Breakeven Calculator: Shows how many days of LP fee yield are required to cover the worst-case hedge loss, turning your position into a "can't lose" setup.

• Price Impact Table: See exact LP value, hedge P&L, and combined net at key price points across your range.

Strategy Overview

Every concentrated liquidity position carries directional exposure. When price exits your range, the value of your LP degrades — and if you're on the wrong side of the move, that degradation can wipe out weeks of accumulated fees.

The LiquidEdge LP Hedge Calculator solves this by letting you pair a perpetual short with your LP position, offsetting downside losses with hedge gains. It supports four distinct hedging approaches:

Below-Range Protection: No hedge opens while price stays in range. If price breaks below your lower limit, the hedge triggers automatically — limiting further losses. Best when you're confident price will stay in range but want a safety net below.

Breakeven at Lower (Recommended — Bearish Bias): Sizes the hedge so that if price falls to your lower range limit, your LP loss and hedge gain cancel out exactly to $0 (excluding fees). Your cost is the hedge loss if price exits to the upside — essentially the insurance premium. Once accumulated yield covers that upside loss, the position becomes unlosable.

Partial Hedge: Covers a percentage of your downside (25%, 50%, 75%). Useful when you're bullish but want a small cushion against a surprise reversal.

Optimal Protection: Balances the hedge so your loss is equal at both the upper and lower range limits — minimizing the maximum loss you can experience. Ideal when you're neutral on direction and just want to harvest fees with minimal directional risk.

Run Your Numbers

Use the LiquidEdge LP Hedge Calculator to model your setup:

1. Set your total deployable capital (or LP value for the reverse method).

2. Choose the asset and set your range limits.

3. Select your hedge type (Breakeven at Lower for bearish bias, Optimal for neutral, Below-Range for confident range-bound, Partial for bullish with a safety net).

4. Adjust leverage (2x recommended for safety, 3x for efficiency).

5. Check the "Days of Yield to Cover" metric — this tells you when your position becomes risk-free.

6. Execute: Open your LP first on your chosen venue, then open the perp short.

Access the LiquidEdge LP Hedge Calculator at: liquidedge.app/tools/hedge-calculator