Pyramid Hedging: A Systematic Alternative to Simple Averaging Down

Averaging down is one of the most common — and most dangerous — approaches to managing losing positions. Without rules, without income generation, and without a maximum deployment cap, simple averaging can lead to catastrophic capital destruction.

Pyramid Hedging is a structured alternative. At initialization, the Growfin engine computes every future buy level using a configurable gap percentage and maximum investment cap. You know exactly where you will buy, how much, and what your cumulative average cost will be at every step.

Income Generation at Every Level

At each accumulation step, the engine selects and sells an OTM call option to generate income. The premium partially offsets the purchase cost and provides downside cushion. Unlike traditional covered calls where all capital is deployed upfront, Pyramid Hedging stages capital deployment across multiple price levels.

Automatic Roll-Downs

As the stock falls toward the next buy level, the engine automatically suggests a ROLL_DOWN_CALL action — closing the existing call hedge and selling a fresh call at a lower strike, closer to the new stock price. The hedge stays relevant without manual intervention.