Hedge Ratios

The hedge ratio controls how much futures notional exposure Aegis opens relative to the LP position value being hedged.

Definition

futures_notional = lp_position_value × hedge_ratio

Where:

lp_position_value is the USD value of the concentrated liquidity position at the time the hedge is opened.
hedge_ratio is a configurable multiplier per strategy.

Unit Exposure

At hedge_ratio = 1.0, the futures position size equals the full LP position value. This is a 1:1 hedge — one dollar of futures notional for every dollar of LP exposure.

Hedge ratio	Futures notional	Description
1.0	= LP position value	Full hedge
0.5	= 50% of LP position value	Partial hedge — lower cost, less protection
1.5	= 150% of LP position value	Over-hedge — more protection, higher margin cost

Numeric Example

Setup: ETH/USDC LP position, current value = $10,000

Hedge ratio	Futures notional	At 10x leverage: margin required
1.0	$10,000	$1,000
0.5	$5,000	$500
1.5	$15,000	$1,500

A hedge_ratio = 1.0 with 10x leverage requires $1,000 margin on the exchange.

Partial Hedging (ratio < 1)

Using a hedge ratio below 1.0 reduces both margin consumption and the degree of protection:

Lower capital requirement: The futures position is smaller, so less margin is needed.
Residual exposure: The LP position retains unhedged delta exposure proportional to (1 − hedge_ratio).

Use case: You want to reduce margin usage while accepting some residual directional exposure.

Over-Hedging (ratio > 1)

Using a hedge ratio above 1.0 creates a net short (or net long) directional position:

More margin required: The futures position is larger than the LP value.
Net directional bias: The strategy becomes directional, not delta-neutral.

Use case: You have a directional view in addition to wanting LP protection.

Configuring Hedge Ratios

Hedge ratios are set per strategy in the dashboard. Different strategies can use different ratios for the same LP position.