Delta Neutral Mode is designed for traders executing spot-futures hedging strategies in the Unified Account’s cross-currency margin mode.
When Delta Neutral Mode is enabled, eligible USDT-margined perpetual contract positions will be ranked lower in the Auto-Deleveraging (ADL) queue, reducing the likelihood of these positions being automatically deleveraged during extreme market conditions.
Activating this mode does not change your current trading approach: you don’t need to close or adjust positions, margin calculation rules remain unaffected, and no other trading features are restricted. Once you meet the requirements, simply toggle the Delta Neutral Mode switch, and the system will continuously and automatically identify and protect qualifying positions.
Below, we’ll cover how to enable Delta Neutral Mode, how the system recognizes hedging across different assets, and the conditions under which contract positions qualify for ADL queue downgrade protection.
Note: In this article, “contract” or “contract position” refers to USDT-margined perpetual contracts. This will not be reiterated in the following sections.
How to Set Up Delta Neutral Strategy Mode
To activate Delta Neutral Strategy, you must switch to the Unified Account’s cross-currency margin mode, and your account VIP level must be VIP4 or above.
Step 1: Log in to your Gate main account, then click on Contracts in the top navigation bar.
Step 2: Select the Settings icon in the upper right corner to access Trading Configuration.
Step 3: Under the Trading Configuration tab, turn on the Delta Neutral Strategy Mode switch.
Note:
Only non-USDT assets are considered. USDT, as the settlement and pricing currency, does not carry hedgeable risk attributes.
Delta Calculation
Spot and perpetual contracts of the same asset can be hedged by holding positions in opposite directions. Positions in different assets cannot be hedged against each other—for example, BTC spot and ETH-USDT perpetual short cannot hedge each other.
| Term | Formula | Description |
|---|---|---|
| Asset Spot Net Delta | = Asset balance + Asset liability | Both balance and liability are directional: positive balance is positive, negative balance is negative, liability is negative. |
| Asset Contract Net Delta | = Position quantity × Position direction | Position direction: long = 1, short = −1. Long contract positions are counted as positive, short as negative. Add long and short positions directly. |
| Asset Total Net Delta | = Asset Spot Net Delta + Asset Contract Net Delta | Reflects the overall directional exposure of spot and contracts for the asset. |
Asset-Level Qualification
Before determining whether a specific contract position qualifies for ADL downgrade protection, the system first checks the “unhedged ratio” for all contract positions of that asset to assess your trading intent.
Asset Contract Unhedged Ratio
Check formula:
$$\text{Asset Contract Unhedged Ratio} = \frac{\text{Asset Contract Unhedged Amount}}{\text{Asset Contract Maximum One-Sided Exposure}} $$
$$\text{Asset Contract Maximum One-Sided Exposure} = \max(\text{Asset Long Contract Quantity},\ |\text{Asset Short Contract Quantity}|) $$
Calculation for asset contract position unhedged amount:
- Step 1: Compare the position’s own Delta direction with the asset contract net Delta direction.
If opposite: Asset contract position unhedged amount = 0.
If same: Proceed to Step 2 and compare with the asset total net Delta direction. - Step 2: Compare the position’s own Delta direction with the asset total net Delta direction.
If opposite: Asset contract position unhedged amount = 0.
If same: $$\text{Asset Contract Position Unhedged Amount} = \min\left(\left|\text{Asset Contract Net Delta}\right|,\ \left|\text{Asset Total Net Delta}\right|\right)$$.
Check Rules
- If contract unhedged ratio ≤ 10%, the asset proceeds to the next step [granular split].
- If contract unhedged ratio > 10%, all contract positions for the asset remain in the regular ADL queue with no special protection.
Note: The 10% threshold is the current setting and may be adjusted according to market conditions without further notice.
Granular Split of Contract Positions
After passing the unhedged ratio check, the system splits contract positions of the asset to determine how much is “hedged” and how much is “unhedged.”
The asset contract unhedged amount has already been calculated above.
Asset contract position hedged amount = |Position’s own Delta| − Asset contract position unhedged amount
ADL Queue Update
After the granular split, contract positions are divided into “hedged” and “unhedged” portions, which participate in different ADL rankings:
- Unhedged portion: participates in the regular ADL queue ranking
- Hedged portion: ranked after the regular ADL queue, entering the ADL protection queue; sorting rules within the protection queue are the same as the regular queue (related to maintenance margin ratio, yield, etc.)
Note: ADL protection does not guarantee that these positions will never be deleveraged—it just lowers their priority in extreme market conditions.
Users can still check the estimated ADL probability for each contract position using the ADL signal lights. The signal lights range from 1 to 5; the more lights illuminated, the higher the probability of auto-deleveraging:
- If your position is unhedged or only partially hedged, the ADL signal lights represent the ranking of the unhedged portion.
- If your position is fully hedged, the ADL signal lights represent the ranking of the hedged portion.
Calculation Example
Suppose a user holds the following BTC assets (BTC index price = 60,000 USD):
| Type | Position |
|---|---|
| Spot balance | +9 BTC |
| Spot liability | 0 BTC |
| USDT-margined perpetual contract (long) | +2 BTC |
| USDT-margined perpetual contract (short) | −12 BTC |
BTC Delta Calculations
- Spot net Delta = 9 + 0 = +9 BTC
- Contract net Delta = 2 + (−12) = −10 BTC
- Total net Delta = 9 + (−10) = −1 BTC
Position-by-position calculation of BTC hedged/unhedged amounts
- +2 BTC long: Opposite direction to contract net Delta (−), so unhedged amount = 0, hedged amount = 2
- −12 BTC short: Same direction as contract net Delta (−), so compare with total net Delta (−), also same direction. Thus, unhedged amount = min(|−10|, |−1|) = 1, hedged amount = 12 − 1 = 11.
So, BTC contract unhedged amount = 1.
BTC contract unhedged ratio check
- Contract maximum one-sided exposure = max(2, |−12|) = 12
- Contract unhedged ratio = 1 / 12 ≈ 8.3% ≤ 10%. Passes the check.
Conclusion: The 2 BTC long contract position is fully placed in the ADL protection queue; of the 12 BTC short contract, 11 BTC goes to the ADL protection queue, and the remaining 1 BTC enters the regular ADL queue.
Frequently Asked Questions
1. Which accounts can enable Delta Neutral Mode?
You must meet both of the following conditions:
- Account mode is cross-currency margin mode (only this mode supports Delta Neutral Strategy)
- Account VIP level is VIP4 or above
If you do not meet these requirements, you will see a prompt when attempting to enable.
2. Can different assets hedge each other?
No. Delta neutrality is determined based on the same underlying asset. For example, BTC positions can only hedge BTC contract positions, not ETH contract positions.
3. After enabling, what happens if my account VIP level drops or an asset temporarily doesn’t meet hedging requirements?
- VIP level drops: Does not affect the already enabled Delta Neutral Mode; the switch remains on.
- An asset fails the “contract unhedged ratio” check (e.g., ratio exceeds 10%): Only that asset does not receive ADL protection for this cycle and is ranked in the regular queue. Other assets are unaffected, and the overall switch remains on. When the asset’s position changes, it will be rechecked for ADL downgrade protection.
- Account switches to non-cross-currency margin mode: Delta Neutral Mode will automatically turn off. When switching back to cross-currency margin mode, the previous switch setting will be retained.
4. If the mode is enabled in the main account, will it automatically be enabled in sub-accounts?
No. Delta Neutral Mode must be enabled independently for each account. Enabling it in the main account does not automatically apply to sub-accounts.
5. After ADL downgrade protection, can I be sure my positions won’t be deleveraged?
No. ADL protection only lowers the priority of these positions in the ADL queue. In extreme market conditions, auto-deleveraging may still occur.
Disclaimer
The content provided herein is for reference and educational purposes only and does not constitute any financial, investment, trading, or legal advice, nor does it constitute an offer or solicitation to buy or sell any digital assets. Gate makes no express or implied representations or warranties regarding the accuracy, completeness, or timeliness of the information contained herein. Product features, interfaces, rules, and fee structures may be updated or adjusted at any time. Please refer to the latest announcements and the actual information displayed on the Gate platform for the most accurate details.
Digital asset investments involve significant risk, and prices may fluctuate substantially. You may lose the entire amount of your investment. Please make decisions cautiously based on your own financial situation and risk tolerance after fully understanding the associated risks. If necessary, you are advised to consult an independent professional financial or legal advisor.
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