Case Study 2: Hedging a Launch.

Launching or buying into a new token is high-risk. This guide explains how to use Specula Prediction Markets to create a "Risk-Neutral" position, protecting your capital against a potential rug pull or immediate sell-off.

The Scenario

You want to buy 10 SOL worth of a new token, $MOON, launching on CogniFi. However, you are worried that early buyers ("Jeeters") might dump the price within the first hour.

The Hedging Strategy

Instead of simply buying the token and hoping for the best, you execute a Delta-Neutral Strategy using the internal prediction market.

1. The Long Position (Capital Appreciation)

• Action: Buy 10 SOL worth of $MOON tokens on the CogniFi AMM.

• Goal: Profit if the price goes up.

2. The Hedge Position (Insurance)

• Market Question: "Will $MOON market cap drop below $20k in the next 24 hours?"

• Action: You bet 2 SOL on "YES" in the Specula market.

• Odds: The current probability is low (e.g., 20%), so the payout ratio is 5:1.

Outcome Analysis

• Scenario A: The Moonshot (Price Rises)

  • Your $MOON tokens double in value (+10 SOL profit).

  • Your prediction bet loses (-2 SOL loss).

  • Net Result: +8 SOL Profit.

• Scenario B: The Dump (Price Crashes)

  • Your $MOON tokens lose 80% of their value (-8 SOL loss).

  • The market cap drops, so your prediction bet wins. You receive a 5x payout on your 2 SOL bet (+10 SOL total return).

  • Net Result: Break-even (or slight profit).

By utilizing Specula, you have effectively purchased insurance on your trade.