HedgX/Options Overlay

Cap the downside. Keep the book.

A governed options programme that protects the B-book against tail, gap and event risk — without surrendering the internalisation edge to a liquidity provider.

Options overlay

Convexity the book never priced — bought back.

The exposure

A B-book is short optionality it never priced.

Every internalised trade is a linear exposure — but the book behaves non-linearly. Its losses accelerate exactly when linear hedges stop working.

01Negative-balance protectionEvery client effectively holds a free option on their own account. When price gaps through stop-out, the broker absorbs the loss beyond client equity.Convex risk

02Gaps and closed marketsWeekends, holidays and halts leave no market to hedge into. A linear hedge cannot be rebalanced through a gap.Convex risk

03Event windowsFlow concentrates into scheduled releases — spreads widen, fills slip and exposure jumps at the moment linear hedging is least effective.Convex risk

04Concentrated positioningRetail exposure clusters in a handful of symbols and in one direction. The book's tail is not diversified.Convex risk

05Informed and coordinated flowCopy clusters and informed accounts act as one large position, often ahead of the move.Convex risk

The case

Linear hedges remove the edge. Options remove the tail.

Offsetting flow with a liquidity provider neutralises risk and revenue together. An options overlay leaves normal flow internalised and pays only when a move is large enough to hurt.

	Internalise unhedged	Linear hedge · A-book / LP offset	Options overlay
B-book expected value	Retained in full	Forfeited on hedged volume	Retained, net of a known premium
Protection against adverse trends	None	Full, one-for-one	Full beyond the protective level
Protection through gaps and closed markets	None	Partial — cannot rebalance through a gap	Contractual
Cost profile	Nothing upfront; unbounded tail	Spread, commission, swap and slippage on every rebalance	Fixed and known at inception
Operational footprint	None	Continuous — mirrors client flow to LPs	Periodic — sized to net book exposure
Best suited to	Random, low-toxicity retail flow	Confirmed toxic or informed flow	Concentrated, event-driven or gap-prone exposure

The principle

Cap the downside. Keep the book.

A net book exposure is left to earn its expected value across normal market outcomes. Beyond a protective level, a contractual payoff replaces an open-ended loss. The shape of the outcome is the point — the specific structures are set per book and per mandate.

Book with overlayUnhedged book

Outcome profile

Illustrative net-short book on a concentrated symbol

Downside

Capped

a hard floor beneath the adverse scenario

Cost of protection

Known

fixed at inception, budgeted against B-book revenue

Upside

Retained

normal outcomes stay internalised

Illustrative · conceptual payoff, not a recommendation or a live position

The mandate

Protection matched to the exposure — not applied as a blanket policy.

The programme covers the specific ways a B-book loses money in size. Structures, tenors and sizing are agreed per mandate and remain confidential to the broker.

Tail and gap protection

Standing cover against the moves the book cannot absorb — including weekends, holidays and market halts.

Event-window cover

Protection timed to scheduled macro, central-bank and corporate events where exposure and slippage jump together.

Concentration cover

Net exposure in the symbols the retail book crowds into, sized to what the book actually holds — not a blanket policy.

Cluster and informed-flow cover

Loss capped on flagged accounts and copy clusters kept internal while the evidence builds.

Carry-aware cover

Structures selected with swap-free and long-tenor books in mind, so protection does not bleed through carry.

Sized by intelligence

Every hedge is driven by the same scoring that drives routing — exposure, tail-risk estimate, cluster status and event calendar.

Driven by HedgX intelligence

Net exposure by symbolTail-risk estimateCluster statusEvent calendarPrediction-market oddsBook classification

Instruments and access

FXG10 and major pairs
OTC via LP / prime broker

Precious metalsGold and silver
OTC and listed

Equity indicesUS and European indices
Listed

EnergyCrude oil
Listed

CryptoBTC and ETH
Listed venues

Governance

A hedge budget — not a hedge reflex.

Every hedge follows explicit triggers, sits inside an agreed budget and is attributed back to the book.

Explicit triggers

Cover is initiated by defined conditions on exposure, tail-risk, cluster confidence and the event calendar — not by discretion on the day.

A budget owned by ownership

The cost of protection is capped as a share of B-book revenue, agreed with the broker and reviewed on a fixed cadence.

Limits and sign-off

Notional and tenor limits per symbol; dealer sign-off above threshold; every hedge logged with a reason code and audit id.

Full attribution

Hedge P&L is reported against book P&L, so the cost of protection is measured — never assumed — and the programme is judged on evidence.

Confidentiality

Programme design, structures and sizing are disclosed to the mandating broker only — never published, never shared across clients.

Six chapters

One risk layer.

From how HedgX positions the broker, through the intelligence and hedging that drive decisions, to the infrastructure and partnership that deliver them.

Next chapter

Technology.

Proprietary MT5 infrastructure, included as standard.

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