A rebalancing tool to delta-hedge a portfolio of cryptocurrency options on Deribit Exchange.

Delta-hedging is a technique which removes a trader’s exposure to directional moves in the underlying asset. Traders who delta-hedge their portfolios are not concerned about the price of an asset going up or down, rather their focus is on how the volatility of an asset changes based on their option position.

If a trader were to identify a mis-pricing of volatility for a particular option, they can buy or sell the option and then delta-hedge this position to remove any price exposure. Many volatility traders constantly monitor their portfolio delta and rebalance accordingly when the exposure becomes too large.

To avoid having to constantly watch open positions, this tool calculates the portfolio delta every 30 seconds and automatically rebalances in the case a delta threshold level is breached. The portfolio is delta-hedged using the chosen asset’s perpetual futures contract on Deribit.

• api_id (string): The ID can be found under API management under account settings on the Deribit website.
• api_secret (string): The secret can be found under API management under account settings on the Deribit website.
• symbol (string): The asset you wish to delta-hedge. Currently only "BTC" and "ETH" are supported with the default value set to "BTC".
• threshold (float): The maximum absolute value of delta exposure to have at any given time. The default value is currently 0.10 which means the portfolio delta will fluctuate between -0.10 to 0.10 of whichever asset you are trading. Any breach beyond this level will result in the portfolio being delta-hedged.

In the example below, the script is setup to delta-hedge Bitcoin (BTC) exposures and rebalance the portfolio in case the delta exceeds +/- 0.10 BTC.

>>> import delta_hedge
>>> id = "replace_this_with_id" # replace your `api_id` in the quotes
>>> secret = "replace_this_with_secret" # replace your `api_secret` in the quotes
>>> dh = delta_hedge.Hedge(api_id=id, api_secret=secret, symbol="BTC", threshold=0.10)

# Get current total portfolio delta exposure for the chosen asset
>>> dh.current_delta()
0.065

# Run continuous delta-hedging. Terminal log example shown below:
>>> dh.run_loop()
'''
No need to hedge. Current portfolio delta: 0.0122
No need to hedge. Current portfolio delta: 0.0136
No need to hedge. Current portfolio delta: 0.0224
No need to hedge. Current portfolio delta: 0.0163
No need to hedge. Current portfolio delta: 0.0536
# When delta rises above threshold (0.10 in this case)
Rebalancing trade to achieve delta-neutral portfolio: sell 0.1000 BTC
No need to hedge. Current portfolio delta: 0.0055
No need to hedge. Current portfolio delta: 0.0073
'''

Run the following command in terminal to install all of the required packages. Users will likely experience errors if they install a different version of the CCXT library compared to the version listed in requirements.txt.

pip install -r requirements.txt