What it pays
Ballast sells parametric cover, not a hedge, and the difference is the whole of this page. The payout is fixed, so the cover is exact at one depth of fall and wrong on both sides of it.
On this page
The instrument#
dreamDEX Event Contracts are at-the-money binaries: one strike per venue per window, struck at the window’s opening price. That is not an assumption — it was checked across every binary market the indexer has ever seen.
| Measure | Result |
|---|---|
| Binary markets examined | 562 |
| Max distinct strikes within one venue, for one (asset, interval, expiry) | 1 |
| Groups where a single venue offered more than one strike | 0 |
| Max distinct strikes across all venues for one group | 2 |
| Groups reaching even 2 | 2 of 560 |
Re-sampled live five times over about four and a half minutes, spanning several sixty-second rollovers: identical every time. Where two strikes appear they are two different venues quoting the same window, not a ladder. There is no out-of-the-money strike to buy instead, and there never has been one.
The payout is fixed#
A binary pays a fixed one collateral unit per winning contract. It does not pay more because the fall was larger. Because the strike is pinned at the window’s open, the bend in the payoff is pinned at a 0% move and cannot be moved.
Three regions#
With exposure E, an adverse move x, and N Down contracts bought at price q:
That gives three regions, and only the middle one is a single point:
- Above the break-even. The fixed payout exceeds the loss, so you come out ahead.
- At it. Loss and payout are equal. This is the make-whole point, and it is one depth, not a range.
- Beyond it. The loss outruns the fixed payout and you are short the difference.
On an upward move the cover pays nothing and the premium is lost.
The sizing arithmetic#
Set the net to zero at the depth you want made whole:
Computed live: exposure from the chain, the make-whole point from the policy actually set, and q = 0.494 from a position that really settled.
| Fall | Position loses | Cover nets | Net | Region |
|---|---|---|---|---|
| 1.00% | −51.06 | +127.66 | +76.59 | over-compensated |
| 2.50% | −127.66 | +127.66 | +0.00 | at the break-even |
| 5.00% | −255.31 | +127.66 | −127.66 | under-compensated |
252 contracts at 0.494 costs 124.63 tUSDC and pays 252.28 if it wins — a net of 127.66, which is exactly what a 2.50% fall costs this position. That is the whole of the design.
The payoff, drawn#
The same chart the dashboard uses, with the real settled positions landing on it. The step is what the instrument pays; the regions are what it costs either side of the load line; the points are what actually happened.
Basis risk, named#
The gap between a fixed payout and a realised loss is basis risk. It is the same trade flight-delay insurance makes: the policy pays the same whether you missed a meeting or a wedding. That is a real product, sold honestly for decades — but it is not a hedge, and calling it one would be the lie.