# Hedging a Short-Term 2-3% Price Decline Trader’s Initial Long Position Details The trader already has an open long position worth $250 USDT, which was executed at the price of $7 per APT for 20X Leverage, resulting in an order with the position size of 35.71 APT tokens but speculates the possibility of a small price drop (\~2-3%). * Opens a short position with an order value of $250 at $6.86 (2% lower). * Short Position Size: S = 250 / 6.86 = 36.45 APT * Margin Used 250 / 20 = 12.5 APT **What Happens If Price Drops?** * At 3% Drop ($6.79) Long PnL = (6.79 − 7) × 35.71 = −7.5 USDT Short PnL = (6.86 − 6.79) × 36.45 = 2.56 USDT * At 2% Drop ($6.86) Long PnL = $-5 USDT Short PnL = $0 USDT (neutral hedge). **Liquidation Risks** Long Position Liquidation Price = 7 × (1−120) = 6.65 This means the Long position liquidates if the price falls below $6.65. Short Position Liquidation Price = 6.86 × (1 + 120) = 7.2 This means the short position liquidates if the price rises above $7.2 **Decision Point** * This hedge partially offsets losses if the price stabilises at $6.79 - $6.86. * The trader can close the short position for a small profit. **Key Takeaway** * Hedging helps protect against a small downside move. * However, if the price rebounds too fast, the short position becomes a liability. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.kanalabs.io/perpetual-futures/kana-perps/breaking-down-kana-perps/hedge-mode/hedging-a-short-term-2-3-price-decline.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.