TradingCalcHedge Ratio Calculator
SPOT HEDGE · PERP SHORT · REQUIRED MARGIN
Calculate the exact short perpetual position needed to hedge your spot holdings.
100% = full hedge · 50% = partial
For funding cost estimate, per payment
1h on Hyperliquid, dYdX, Kraken and Backpack; 8h on most others
How to use the hedge ratio calculator
- Enter your spot holding size in USD (current market value).
- Set the hedge ratio: 100% for full hedge, 50% for partial, etc.
- Enter your short leverage for the perpetual futures leg.
- Set the current funding rate (the rate per payment, as your exchange shows it) and the funding interval (8h on most venues, 1h on Hyperliquid, dYdX, Kraken and Backpack).
- Read the short position size, required margin and estimated daily funding cost/income.
Hedge ratio formula
Hedging a spot position with a perpetual futures short eliminates price exposure proportional to the ratio:
- Short position size = spotValue × hedgeRatio
- Required margin = shortSize / leverage
- Daily funding = shortSize × fundingRate × (24 / interval hours), which is × 3 at the usual 8h interval
On a coin-margined (inverse) contract the short is the same USD value in contracts, but margin and funding are paid in the base coin, so each is the USD figure divided by the coin price. Pick "Inverse" and enter the coin price: a 100% hedge then offsets the holding in USD exactly.
When funding is positive, short holders receive daily income, making the hedge cash-flow positive. When funding turns negative, the hedge has a carrying cost.
Worked example: hedge 2 BTC spot at 75%
- Spot: 2 BTC at $62,000 = $124,000 · Hedge ratio: 75% · Leverage: 3× · Funding: 0.01%/8h
- Short size = $124,000 × 0.75 = $93,000
- Required margin = $93,000 / 3 = $31,000
- Daily funding received = $93,000 × 0.0001 × 3 = $27.90
- Annual funding income = $27.90 × 365 ≈ $10,184
The 75% hedge protects against 75% of downside moves. If BTC drops 10% ($12,400 spot loss), the short earns approximately $9,300, offsetting 75%. The remaining 25% unhedged provides continued upside participation. The $31,000 margin earns $10,184/year from funding, a ~32.8% yield on that margin.
Choosing between 100% and partial hedge
A full 100% hedge eliminates price risk completely but also eliminates upside. Use 100% hedging when you want to lock in gains without selling (e.g., avoiding a taxable event) or during high-uncertainty periods. Partial hedges (50–80%) are common for long-term holders who want to reduce volatility while keeping some exposure to potential rallies.
While your short leg is open, check the Funding Rate Arbitrage Calculator to see if the spread on that leg is also worth capturing, or the Compound Funding Calculator to project reinvested funding income over the hedge's life.
Combine with a full pre-trade check
The hedge ratio gives you the short leg size. Before opening it, check its own liquidation distance and margin requirement in one pass:
Run Pre-Trade Risk Check →Use via API or MCP
Hedge sizing, required margin, and funding cost are all available as a deterministic API call: plug them into a portfolio dashboard, hedging bot, or AI agent that needs exact numbers, not estimates.
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What assumptions and edge cases does this calculator use?
Spot size (in dollars) must be above zero, the hedge ratio is 0 to 200 percent (default 100), leverage is 1 or more, and the funding rate is in percent per interval (default 0.01). An inverse contract also needs the entry price. Not covered: the gap between spot and the perp, rebalancing as prices move, margin calls and a funding rate that changes.
What is a hedge ratio in crypto trading?
A hedge ratio is the proportion of your spot position you protect with a short perpetual futures contract. A 100% hedge ratio means you open a short perp equal to the full value of your spot holdings, neutralizing price risk. A 50% ratio gives partial protection while keeping some upside.
How much margin do I need to hedge my spot position?
Required margin = (Spot Size × Hedge Ratio) / Leverage. For example, hedging $10,000 of BTC at 100% ratio with 2× leverage requires $5,000 in margin. Higher leverage reduces the margin needed but increases liquidation risk on the short leg.
What is the cost of hedging with perpetual futures?
Hedging with a short perp has an ongoing funding cost. When funding rates are positive (longs pay shorts), short holders receive funding, making the hedge cash-flow positive. When funding is negative, you pay it. The calculator estimates daily and annual funding cost based on the current funding rate per payment and the funding interval you pick (8h on most venues, 1h on others).
When should I use a partial hedge ratio instead of 100%?
A partial hedge (e.g. 50–75%) is useful when you want to reduce downside risk while still participating in potential upside. It also requires less margin. Traders often use partial hedges during uncertain market conditions rather than closing their spot position entirely.