limit-offset-bps-calculation

Limit Order Offset (BPS) Calculation

When This Skill Activates

Apply this skill every time an Alo (post-only) limit order price must be determined before submission. The skill answers: how many basis points inside or outside the spread should the limit price be placed?

Also apply when:

• An Alo order was rejected (price crossed spread) and a new offset must be computed before reposting
• Fill rate on resting limit orders is unacceptably low and offset calibration needs review
• A new asset is being traded for the first time and no historical offset data exists yet
• Spread has widened significantly (low liquidity period, news event) and the standard offset is stale

---

Core Principle

A post-only limit order placed too far from mid rests on the book for a long time and may never fill — opportunity cost. Placed too close to mid it risks crossing the spread on a momentary tick and being rejected as a taker (or, with Gtc, accidentally paying taker fee). The optimal offset is the minimum distance from mid that reliably lands inside the book as a resting maker order given current spread and volatility, without being so far away that fill probability collapses.

Rule: Place limit orders at mid ± offset_bps where offset_bps is computed fresh from live spread and recent volatility at the time of each order. Never use a hardcoded static offset across all market conditions.

---

Inputs Required

Fetch all of the following from HyperLiquid before computing offset:

# From WebSocket l2Book or REST /info → l2Book(coin):
best_bid   = l2book["levels"][0][0]["px"]   # highest bid price
best_ask   = l2book["levels"][1][0]["px"]   # lowest ask price
mid_price  = (best_bid + best_ask) / 2
raw_spread_bps = (best_ask - best_bid) / mid_price * 10000

# From REST /info → meta + assetCtxs:
mark_price = asset_ctx["markPrice"]         # oracle mark; use for offset anchor
tick_size  = asset_meta["szDecimals"]       # price precision (decimal places)

# From recent trade history (last 50–100 trades, 5m window):
import statistics
trade_prices  = [t["px"] for t in recent_trades]
volatility_bps = statistics.stdev(trade_prices) / mid_price * 10000
# Short-window volatility: 1-sigma move in the last 5m in basis points

---

Offset Calculation

Base Offset Formula

def compute_limit_offset_bps(
    raw_spread_bps: float,
    volatility_bps: float,             # 5m 1-sigma in bps
    side: str,                         # "buy" or "sell"
    order_urgency: str = "normal",     # "normal", "patient", "urgent"
    book_fragility: float = 0.0,       # 0–1; from liquidation-cascade-risk
) -> float:
    """
    Returns the offset in basis points from mid.
    Positive offset = deeper into the book (better fill safety, worse fill rate).
    """
    # Half-spread is the minimum safe distance to guarantee maker status
    half_spread_bps = raw_spread_bps / 2

    # Safety buffer: 1 tick worth of extra clearance beyond half-spread
    # Prevents rejection on micro-moves at the moment of submission
    safety_buffer_bps = max(0.5, half_spread_bps * 0.10)

    # Volatility buffer: scale with recent short-window vol to avoid
    # being crossed during order transit latency (~50–200ms on HL)
    vol_buffer_bps = volatility_bps * 0.20   # 20% of 1-sigma 5m vol

    # Base offset: half-spread + safety + vol buffer
    base_offset = half_spread_bps + safety_buffer_bps + vol_buffer_bps

    # Urgency modifier:
    urgency_multiplier = {
        "urgent":  0.5,    # closer to mid; accept higher rejection risk for better fill
        "normal":  1.0,    # standard
        "patient": 1.5,    # deeper in book; lower rejection risk; slower fill
    }[order_urgency]

    # Book fragility modifier: widen offset when book is thin
    # (thin books = higher vol transit risk = needs more clearance)
    fragility_multiplier = 1.0 + (book_fragility * 0.5)

    offset_bps = base_offset * urgency_multiplier * fragility_multiplier

    # Clamp: never closer than 0.5 bps (tick noise floor)
    #        never farther than 5.0 bps (fill probability collapses)
    return max(0.5, min(5.0, offset_bps))

Applying Offset to Order Price

def compute_limit_price(
    mid_price: float,
    offset_bps: float,
    side: str,
    tick_size_decimals: int,
) -> float:
    """
    Buy orders: place BELOW mid (offset into bid side)
    Sell orders: place ABOVE mid (offset into ask side)
    Round to asset tick size to avoid rejection for invalid price precision.
    """
    offset_price = mid_price * (offset_bps / 10000)

    if side == "buy":
        raw_price = mid_price - offset_price
    else:  # sell
        raw_price = mid_price + offset_price

    # Round to valid tick size (round down for buys, up for sells
    # to stay on the correct side of mid after rounding)
    factor = 10 ** tick_size_decimals
    if side == "buy":
        return math.floor(raw_price * factor) / factor
    else:
        return math.ceil(raw_price * factor) / factor

---

Offset Calibration by Market Condition

Spread Regime Classification

Classify current spread before applying offset to set urgency defaults:

Spread (bps)	Regime	Suggested Urgency	Notes
< 1.0	Tight	normal	Liquid; standard offset works well
1.0–2.5	Normal	normal	Typical for mid-cap perps
2.5–5.0	Wide	patient	Low liquidity; widen offset or wait
5.0–10.0	Very wide	patient + size reduction	Consider deferring non-urgent entries
> 10.0	Illiquid	Defer or use Ioc taker if urgent	Maker fill unlikely at reasonable offset

When spread > 10 bps and the entry is time-critical, the cost of waiting for a maker fill (missing the move) may exceed taker fee. Defer to maker-order-preference-fee-reduction for the explicit taker-vs-maker decision; this skill only handles the offset calculation for the maker path.

Volatility Regime Adjustment

5m Volatility (bps)	Vol Regime	vol_buffer_bps	Effect on Offset
< 2	Low vol	0.4	Offset stays near minimum
2–5	Normal vol	0.4–1.0	Standard offset range
5–10	Elevated vol	1.0–2.0	Offset widens meaningfully
10–20	High vol	2.0–4.0	Approach upper clamp; consider patient
> 20	Extreme vol	Clamp at 5.0	Near-cascade conditions; see liquidation-cascade-risk

---

Asset-Specific Tick Size Reference

HyperLiquid enforces strict price precision per asset. Submitting an order with more decimal places than allowed causes immediate rejection.

# Always fetch live from /info → meta:
asset_tick_map = {
    asset["name"]: asset["szDecimals"]
    for asset in meta["universe"]
}

# Common values at time of writing (verify live — do not hardcode):
# BTC:  1 decimal place  (e.g. 91450.0)
# ETH:  2 decimal places (e.g. 1791.40)
# SOL:  3 decimal places (e.g. 138.250)
# ARB:  5 decimal places (e.g. 0.47820)
# DOGE: 6 decimal places (e.g. 0.072340)

The compute_limit_price() function above handles rounding automatically when tick_size_decimals is passed correctly. Always fetch tick size from live meta, never hardcode it.

---

Worked Examples

Example 1 — BTC, Normal Conditions

Inputs:
  mid_price       = 91,500.00
  best_bid        = 91,494.00
  best_ask        = 91,506.00
  raw_spread_bps  = 12 / 91,500 * 10,000 = 1.31 bps
  volatility_bps  = 3.2 bps  (last 5m trades)
  side            = "buy"
  urgency         = "normal"
  book_fragility  = 0.10

Calculation:
  half_spread     = 0.655 bps
  safety_buffer   = max(0.5, 0.655 * 0.10) = 0.50 bps
  vol_buffer      = 3.2 * 0.20 = 0.64 bps
  base_offset     = 0.655 + 0.50 + 0.64 = 1.795 bps
  urgency_mult    = 1.0
  fragility_mult  = 1.0 + (0.10 * 0.5) = 1.05
  offset_bps      = 1.795 * 1.0 * 1.05 = 1.885 bps  → clamped to range: 1.885

Limit price:
  offset_price    = 91,500 * (1.885 / 10,000) = 1.725
  raw_price       = 91,500 - 1.725 = 91,498.275
  tick_size       = 1 decimal → floor to 91,498.2

Order submitted: BUY limit 91,498.2  (Alo, tif="Alo")

Example 2 — ETH, Elevated Volatility

Inputs:
  mid_price       = 1,792.00
  raw_spread_bps  = 2.80 bps
  volatility_bps  = 8.5 bps  (elevated; approaching news event)
  side            = "sell" (TP exit)
  urgency         = "patient"
  book_fragility  = 0.25

Calculation:
  half_spread     = 1.40 bps
  safety_buffer   = max(0.5, 1.40 * 0.10) = 0.50 bps
  vol_buffer      = 8.5 * 0.20 = 1.70 bps
  base_offset     = 1.40 + 0.50 + 1.70 = 3.60 bps
  urgency_mult    = 1.5  (patient)
  fragility_mult  = 1.0 + (0.25 * 0.5) = 1.125
  offset_bps      = 3.60 * 1.5 * 1.125 = 6.075 bps  → clamped to 5.0 bps

Limit price:
  offset_price    = 1,792 * (5.0 / 10,000) = 0.896
  raw_price       = 1,792 + 0.896 = 1,792.896
  tick_size       = 2 decimals → ceil to 1,792.90

Order submitted: SELL limit 1,792.90  (Alo, tif="Alo")

---

Fill Rate Monitoring and Self-Calibration

MetaClaw’s skills auto-evolve from deployment experience. To enable this skill to improve its offset calibration over time, log sufficient data for the RL replay buffer:

{
  "event": "limit_order_offset_calc",
  "asset": "BTC",
  "timestamp_utc": "2026-04-07T22:00:00Z",
  "side": "buy",
  "mid_price": 91500.00,
  "raw_spread_bps": 1.31,
  "volatility_bps_5m": 3.2,
  "book_fragility": 0.10,
  "urgency": "normal",
  "offset_bps_computed": 1.885,
  "limit_price": 91498.2,
  "order_result": "filled",        // "filled", "partial", "expired", "rejected"
  "fill_latency_seconds": 14.3,    // time from placement to fill
  "fill_price": 91498.2,
  "slippage_bps": 0
}

Fill Rate Thresholds for Recalibration

If the rolling 50-order fill rate for a given asset falls outside the acceptable range, recalibrate the offset multipliers:

Fill Rate	Diagnosis	Recalibration Action
> 95%	Offset too deep	Reduce urgency_multiplier by 0.1; or reduce safety_buffer
80–95%	Optimal range	No change
60–80%	Offset borderline	Review spread regime; check for persistent wide spread
< 60%	Offset too tight	Increase vol_buffer coefficient (0.20 → 0.25); or switch urgency to patient
High rejection rate	Alo crossing spread	Increase safety_buffer to 1.0 bps; review mid-price staleness

---

Failure Modes to Avoid

• Using a static offset across all assets and conditions: BTC at 1 bps spread needs a different offset than DOGE at 8 bps spread. Offset must be computed per-asset per-order from live data.
• Anchoring to mid_price from a stale snapshot: Mid-price from the last REST poll may be 200–500ms old on a fast market. Use the WebSocket l2Book subscription for real-time mid when placing orders in volatile conditions (volatility_bps > 5).
• Ignoring tick size rounding direction: Rounding a buy limit price up instead of down can push it above best ask, crossing the spread and triggering Alo rejection. Always floor buy prices and ceil sell prices after offset application.
• Applying the upper clamp (5.0 bps) as a routine offset: The 5.0 bps clamp is a safety ceiling, not a target. Consistently hitting the clamp means market conditions are too volatile or illiquid for maker execution; the correct response is to defer the order, not to accept a 5 bps penalty as standard.
• Not refreshing offset on order re-queue: If an Alo order expires or is cancelled and must be reposted, recompute the offset from fresh data. Market conditions at repost time may be materially different from the original placement.
• Conflating offset with slippage: Offset is the deliberate distance placed into the book on the maker side. Slippage is unintended price deviation on taker fills. They are separate quantities; do not use slippage tolerance parameters to govern maker order offsets.

---

Integration with Other Skills

• maker-order-preference-fee-reduction (execution/): Run first to decide whether to use Alo. This skill runs second to decide where to place the Alo order. They are always used together.
• slippage-budget-enforcement (execution/): For taker orders, that skill governs the price tolerance. This skill is maker-path only.
• liquidation-cascade-risk (regime-detection/): Passes book_fragility score as an input to this skill’s offset formula. Higher fragility → wider offset → less chance of Alo rejection from a volatile book.
• trending-bull-entry-timing (regime-detection/): Provides the Fibonacci target price as the anchor for the offset calculation. This skill computes the final submitted price around that anchor.

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Quick Decision Tree

Need to place an Alo limit order — what price?
│
├── 1. Fetch live l2Book → best_bid, best_ask, mid_price
├── 2. Compute raw_spread_bps and volatility_bps (last 5m trades)
├── 3. Get book_fragility from liquidation-cascade-risk if available
├── 4. Classify spread regime (tight / normal / wide / illiquid)
│     └── Illiquid (> 10 bps)? → Defer or escalate to taker decision
├── 5. Set urgency: normal (default) / patient (wide spread or low urgency)
├── 6. Run compute_limit_offset_bps() → offset_bps
├── 7. Run compute_limit_price() with tick_size from live meta → limit_price
├── 8. Submit order with tif="Alo" at computed limit_price
│
├── Alo FILLS → log event with fill_latency. Done.
├── Alo REJECTS → price moved. Recompute offset from fresh data. Reassess entry.
└── Alo EXPIRES (GTC timeout) → Recompute. Re-evaluate setup validity.