Hedging LP Positions with Tradoor (Perpetual Futures)

📘 Want to protect your liquidity position on Bidask from downside risk? One efficient method is to use decentralized perpetual futures on Tradoor — a flexible and capital-efficient tool for hedging.

Why Use Perpetuals?

Perpetual contracts are derivatives that let you open long or short positions on assets with no expiration date. Tradoor supports up to x100 leverage, offering an efficient alternative to traditional lending-based hedging.

Compared to overcollateralized DeFi loans, shorting with perpetuals requires significantly less upfront capital. You can open positions using margin as collateral, making this method more accessible. However, be cautious: leveraged positions carry liquidation risks if the market moves against you.

Practical Example

Let’s say you have $15,000 and want to provide liquidity on the TON/USDT pair via Bidask.

TON is trading at $5
You allocate 1,500 TON and 7,500 USDT to the pool, setting your price range between $4.5 and $5.5

As long as the market price remains within this range, you earn fees from trades. But one day, TON falls to $4, going out of your set range.

🔁 Your LP position gets rebalanced, and you now hold approximately 3,060 TON (all USDT has been converted). You’re now 100% exposed to TON, and your dollar value has dropped.

Let’s Calculate Returns

Assuming a 100% APR, and you stayed in range for 30 days, your earnings from fees are:

$7,500 * 2 * 100% * 30 / 365 = $1,232

Now, if you sell your 3,060 TON at $4 each, that’s:

3,060 * 4 = $12,240
Total proceeds: $12,240 + $1,232 = $13,472
Original value: $15,000
Net loss: -$1,528 or -10.18%

What if You Hedged on Tradoor?

Let’s consider you had shorted TON in advance:

You use 5,000 USDT as margin to short 1,000 TON at $5 (no leverage for simplicity)
Stop-loss set at $4.5 — matching your Bidask range's lower bound

Now, when TON drops to $4:

You exit your LP position and withdraw ≈2,040 TON
You sell these at $4 = $8,160
Your short nets $1,000 in profit (1,000 TON * $1 price drop)
Return of initial $5,000 collateral
Service fee = 0.09% of $5,000 = $4.50

Total:

$8,160 (LP) + $1,000 (short PnL) + $5,000 (collateral) - $4.5 = $14,155.50
Add trading fees ($1,232)
Final amount: $15,387.50, or +2.58% gain

✅ Compared to a -10% loss without hedging, this is a clear improvement.

Summary: Hedging vs. No Hedging

Strategy Result

No Hedge $13,472 (-10%)

Hedge + Short $15,387 (+2.6%)

Step-by-Step Hedging Strategy

Open a Short Position on Tradoor

Allocate 5,000 USDT
Short 1,000 TON (assuming price is $5)
Set stop-loss at $4.5

Provide Liquidity on Bidask

Add 1,000 TON + 5,000 USDT to the TON/USDT pool
Your total position: $10,000 in liquidity and $5,000 in the hedge

💡 If TON drops, your LP loses value, but your short position offsets that loss — stabilizing your capital and even generating profit through arbitrage.