“What does the Hedge switch on my position actually do?” It queues a paper ETH short sized off your WETH, arms at the next snuggle, and — today — no live order is placed.
1 · Step by step
One position, one picture, six steps
Positions that hold WETH show a Hedge switch, optional and off by default. Turn it on and the app sizes a paper (simulated) ETH short at 50, 75 or 100 % of the position's WETH, so that when ETH moves, the short moves the other way and less of the swing lands on you. The six steps below walk through one position on one picture: what the switch does, how the size is chosen, when it actually arms, what happens as ETH moves, which safety rails sit around it, and why it is paper today. Every number on the page is one you type yourself; nothing here reads a wallet or a live position.
Step 1 of 6
Your position holds WETH
ETH −20 %
−40−200+20+40
Soft stop ≈ 10 % of hedge marginflattens hedge only
Liq distance —guard min 20 % · read from the paper venue
Re-arm · manualresets the illustration: Δ back to 0
Position inputs (illustrative)
Leverage (illustrative)Illustrative only — the real number comes from the paper venue's settings.
Illustrative and simplified: W = WETH × ETH price; WETH-leg change = W×Δ; hedge PnL = −W×h×Δ; net = W×Δ×(1−h); soft stop ≈ 10 % of margin (W×h ÷ leverage). Fixed WETH amount; ignores funding, fees and basis; a range position's WETH amount changes as price moves → Impermanent loss. "Flat" at 100 % means flat on paper in this model, not zero risk.
Paper today, sized off WETH, armed at the next snuggle
Paper today.A paper (simulated) ETH short on GMX V2 (Arbitrum): no live order is placed, and its paper PnL is tracked with the position — it compounds to the LP principal rather than returning to your wallet. A live venue is not wired yet.
Sized off WETH only.Hedge notional = the position's WETH × the size you pick (50, 75 or 100 %). The other leg is left alone, so the hedge does not cover the whole position and does not remove impermanent loss.
Arms at the next snuggle.Turning it On (or Off) queues the intent; the change applies at the next auto snuggle or manual rebalance, not immediately.
Soft stop.If the hedge's paper loss reaches about 10 % of its margin, a soft stop flattens the hedge only; the LP position is untouched.
Re-arm manually.A stopped hedge stays off until you re-arm it yourself. A liquidation-distance guard warns when the paper venue's liq distance falls below its default minimum of 20 %; margin, leverage, funding and price impact are read from the paper venue at runtime and are not fixed numbers.
Not automatic protection.You arm it; it is off by default, and it does not run on its own.
3 · Honest limits
Good for the mechanics. Not for exact numbers.
Useful for
Seeing how a short sized off the WETH leg changes what a price move does to the position.
Understanding what “queued”, “armed”, “flattened” and “re-arm” mean before you touch the real switch.
Getting a feel for how early a soft stop at 10 % of margin trips.
Not for
Exact numbers. The maths is illustrative and simplified (WETH-leg change = W×Δ, hedge PnL = −W×h×Δ, net = W×Δ×(1−h)); it holds the WETH amount fixed and ignores funding, fees and basis, while a range position's WETH amount changes as price moves (see Impermanent loss).
Zero risk. “Flat at 100 %” means flat on paper in this model, not zero risk.
Quotes. The leverage you pick here is illustrative — the real number comes from the paper venue's settings — and no fee, funding, liq price or margin figure on this page is a quote.
Returns. Nothing here promises returns; the line at the foot of the page applies to every number above.
Read next
Where the hedge fits in the wider picture
Optional, off by default, paper today. Arm it on purpose, or leave it off.