Curriculum·Senior·R409
Grid, DCA, and Rule-Based Automation
CITIC Pacific, 20 October 2008.6M on Australian dollar forwards bought and sold to manage the exposure.
Lesson 1 opens on
Iron Finance and TITAN, 16 June 2021
Iron Finance issued IRON, a token intended to hold a dollar value, backed partly by USDC and partly by its own TITAN token in a stated ratio of about 75 to 25. The mechanism was arithmetic rather than discretionary: minting IRON burned TITAN, and redeeming IRON minted new TITAN. On 16 June 2021 large liquidity providers withdrew from the IRON and USDC pool and began selling TITAN, which triggered redemptions, which minted more TITAN into a falling market, which triggered further redemptions.
The lessons
- R409-01Grid mechanics from first principlesDefine a grid by its five parameters and derive every other quantity from themabout 42 min · opens on Iron Finance and TITAN, 16 June 2021
- R409-02The arithmetic the interfaces hideSeparate realized cycle profit from the unrealised mark on accumulated inventoryabout 42 min · opens on The 3Commas API key leak, 2022
- R409-03The structural insight: a grid is a short-volatility positionState the payoff identity: capped above, nearly unbounded belowabout 33 min · opens on XIV, 5 February 2018, read as a payoff
- R409-04Grid variants and their risk changesName the five common variants and the single risk each one changesabout 42 min · opens on The GDAX ether flash crash, 21 June 2017
- R409-05Configuration as a risk decisionShow that the configuration screen is the entire risk statement, because there is no stop fieldabout 41 min · opens on The Robinhood leverage configuration error, November 2019
- R409-06DCA and averaging botsDistinguish scheduled averaging from a martingale safety-order ladderabout 42 min · opens on Barings and the doubling sequence, 1992 to 1995
- R409-07Regime dependence, which is the whole gameState why a grid has no expectancy independent of regimeabout 33 min · opens on The quant quake, week of 6 August 2007, read as a regime change
Labs
R409-L1
Configure a grid on paper: range from measured volatility, geometric spacing, grid count, capital per level, fee-adjusted profit per cycle, required oscillation frequency, and full breach accounting on both sides. No bot interface permitted.
R409-L2
One grid configuration across a ranging period, a strong uptrend and a strong downtrend, with fees and funding, against holding. Pass requires producing the regime in which the configuration loses badly and the arithmetic of why.
R409-L3
For a supplied DCA bot configuration, compute the maximum deviation coverage by hand and compare it against the instrument's three largest historical drawdowns. State what you hold, and at what average price, if coverage is exhausted.