Inverse Etf Proxy

Inverse ETF Proxy for Crypto Shorts

Version: v5.4.4 (2026-04-03) Status: Implemented, untested in live trading Project: Alpaca_Trading

Problem

Crypto short selling is not supported on most retail exchanges (Alpaca, CCXT). When RL models trained on BTC/USD or ETH/USD predict a price decline (SELL signal), the signal was silently dropped — wasting half the model's predictive capability.

Solution

Route crypto SELL signals to inverse ETFs: buying an inverse ETF is economically equivalent to shorting the underlying asset.

Proxy Mapping

INVERSE_ETF_PROXIES = {
    "BTC/USD": "BITI",   # ProShares Short Bitcoin ETF (-1x daily)
    "ETH/USD": "SETH",   # ProShares Short Ether ETF (-1x daily)
}

Other available options (not used):

• SBIT: ProShares UltraShort Bitcoin (-2x, higher volume ~2.8M/day)
• ETHD: ProShares UltraShort Ether (-2x)
• BTCZ: T-Rex 2X Inverse Bitcoin (-2x)

Architecture

1. Signal detection (decide_and_trade_optimized(), line ~1625): When crypto SELL detected, return skip_reason="inverse_etf_signal" with proxy info instead of "crypto_no_short"
2. Proxy execution (main loop, after decide_and_trade_optimized): Check stock market hours → fetch proxy price → calculate position size → submit BUY order via Alpaca (equity routing)
3. Signal reversal (main loop): When crypto signal becomes BUY/HOLD, close inverse ETF position with market sell
4. EOD flatten: Proxy positions in states dict are automatically flattened by existing shutdown loop
5. Gate status: Reports "PROXY" with action_taken="inverse_etf:BITI"

Key Design Decisions

• -1x not -2x: Using unlevered inverse ETFs to match model's prediction magnitude without amplification
• Half allocation: Conservative sizing (50% of remaining capital × drawdown scale) since inverse ETFs have tracking error
• Equity routing: Inverse ETFs route through Alpaca (not CCXT) automatically since detect_asset_type("BITI") returns STOCK
• Market hours constraint: Inverse ETFs only trade 9:30-4:00 ET. Off-hours crypto SELL signals are logged and skipped
• No stop/TP on proxy: Model-learned stop/TP distances are calibrated for spot crypto, not ETF prices. Exit on signal reversal only.

Limitations

Files Modified

• scripts/live_trader.py: INVERSE_ETF_PROXIES config, get_latest_price(), proxy execution in main loop, gate status reporting
• scripts/CLAUDE.md: Documentation added

Testing Needed

• Paper trading with crypto SELL signals during market hours
• Verify BITI/SETH available on Alpaca paper account
• Verify position reconciliation covers proxy symbols
• Verify EOD flatten includes proxy positions

Failed Attempts