When trading a 1-1-2 strategy, you may encounter a hedge pop-up if your trade has been converted into a hedge. This guide will walk you through how to interpret the hedge pop-up, including key trade details, costs, and potential profits.
Open your trading platform.
Locate your trade and check for the hedge icon—this indicates the trade has been converted into a hedge.
Click on the trade to view more details.
Click on the three-line menu (Trade Details).
Look for the 1-1-2 trade structure under your positions.
If part of the trade has been closed (e.g., one leg was closed on a specific date), the remaining position is now a put debit spread, confirming the hedge.
Click the Hedge button to see detailed hedge information.
The pop-up will show:
Downside protection value (e.g., $1,000 if the market crashes).
Cost of the hedge (e.g., $230).
Key Concept:
A hedge provides protection but comes at a cost.
In this example, if the market drops, the hedge can generate a max profit of $1,000 but costs $230 to maintain.
The pop-up will also display your total profit and loss, factoring in the hedge cost.
Your P&L is calculated as:
Profit from the closed portion of the trade – Cost of hedge = Net Profit/Loss
If the hedge goes to zero, the cost of the hedge will be deducted from your overall profit.
If the market is currently above the hedge profit level (e.g., $1,164 vs. $1,000), you have an opportunity to let the hedge run or exit it.
Over time, the hedge will lose value unless the market moves in your favor.
Most traders choose to leave the hedge on for protection.
Hedge icon signals a trade conversion.
Trade Details show your remaining position.
Hedge pop-up displays max protection and cost.
P&L calculation helps assess the trade’s impact.
Decision-making depends on market conditions and your risk tolerance.
By understanding the hedge pop-up, you can make informed decisions about managing your trade and potential risks.
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