Hedging in Allasso’s backtesting engine allows you to simulate less risky strategy performance by managing directional risk using futures. The hedging module gives you fine-grained control over how and when hedge positions are entered, rolled, or exited.
Below is an explanation of each hedging parameter available in the interface.
⚙️ Hedge Settings Overview
| Setting | Description |
|---|---|
| Type | Selects the type of hedge to apply. Options include: • no – no hedging applied• delta – apply delta hedging using futures(Coming soon: gamma hedging support is in development)
|
| Frequency | Controls how often the hedge is recalibrated. You can choose: • daily• weekly• monthlyHedge adjustments will only occur on the defined schedule. |
| Source | What future will be source for the hedge: • Front Future / Spot- Front future by default, hedging delta of entire structure. • Unferlying Future / Spot - using corresponding underlying future. Structure is hedged separately for every underlying future. |
| Future Min DTE | Defines the minimum days to expiration required for a futures contract to be considered eligible for the hedge. This ensures short-dated contracts are excluded. |
| Future Nearest | Specifies how far out on the futures curve to go when selecting the hedge instrument. • 1 = front-month• 2 = second-month• 3 = third-month, etc. |
🧠 How It Works
When delta hedging is enabled, the engine calculates the net delta exposure of each strategy and offsets it using futures contracts, following the frequency and future selection rules you've configured.
Example:
If you set:
Type = deltaFrequency = weeklyFuture Min DTE = 5Future Nearest = 2
→ The system will evaluate delta exposure once a week and use the second-nearest futures contract (with at least 5 days to expiration) to hedge the position.
🌐 Multi-Asset Backtesting
When running multi-asset backtests (e.g., across multiple underlying or tickers), hedging is performed individually for each asset. This means each asset's delta exposure is calculated and hedged on its terms, using the corresponding futures contracts.
📌 Coming Soon: Gamma Hedging
We’re actively working on support for gamma hedging, which will allow you to control second-order risk and enhance the realism of complex option strategies. Stay tuned for updates in future releases.
❓Need Help?
If you're unsure which futures contracts are eligible for a particular asset or need help configuring your hedge strategy, reach out to us — we’re here to help!
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