Answers

What is bundle hedging?

Hedging a bundle in arbitrage trading means using special strategies and tools to manage risk and provide protection against losses when trading across different markets or exchanges. Arbitrage traders often use hedging to reduce risk and provide more stable returns. UGM Crypto has developed a bot for external arbitrage with automatic hedging.


Here's how it works:


1. “What is a bundle”: A bundle (or pair) is a combination of two identical assets that are traded on different exchanges or markets. For example, a trader might hold a bundle of Bitcoin (BTC) or (BNB) and try to profit from the price difference between them on different exchanges.


2. "Arbitrage": Arbitrage involves the simultaneous buying and selling of assets (such as BTC and BNB) on different exchanges or markets in order to profit from price differences. If a trader sees that the price of BNB on one exchange is higher than on another, he can buy BNB on the exchange with the lower price and sell it on the exchange with the higher price, earning the difference.


3. “Hedging the Link”: Hedging means applying additional trades or strategies to protect against potential losses in arbitrage trading. For example, if a trader sees that the price of BNB on one exchange is underestimated, and on another it is correspondingly overestimated, then where the price is overestimated, the trader hedges the bundle, after which he can profit from this arbitrage without losses.


4. “Hedging instruments”: To hedge a combination, traders can use various instruments, such as options, futures, stop-limit orders and others. They can create balanced positions that allow them to protect their assets from adverse price movements.


Risk management and hedge hedging in arbitrage trading are important aspects that help traders ensure stability and protection from potential losses. Creating an automated arbitrage hedging system, UGM Crypto Exchange, can significantly simplify the process and increase the efficiency of arbitrage trading.