A 98th-percentile week reopens a loss-limit fund's exposure question
Should the fund restore full exposure after a 98th-percentile up-week, or re-enter in stages sized so its fixed loss limit survives a reversal like the week's 4.83% hour?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 9 January 2023, BTC rose 21.86%, from 17,127.83 to 20,871.50, with a 24.28% range, a 4.83% largest hour, and a close in the upper third of the range; dollar volume ran 1.35 times its prior 12-week average. The move ranked in the 98th percentile of 256 weeks, yet price remained 56.49% below its 52-week high and the four prior weeks were mixed, two up and two down. An illustrative fund with a fixed loss limit returns to a market whose last four weekly returns were -2.03%, 0.56%, -1.28% and 3.07%.
Judgment
Realised vol of 61.5% annualised inside a 24.28% week means a fixed loss limit will trip again on an ordinary retracement if exposure is restored at once. Re-enter in stages, sizing each so the limit survives a repeat of the 4.83% hour rather than a calmer week. The low came before the high, so the fund is adding after the week's rise, not into its decline. Funding averaged only 0.0091% per eight hours, so leverage cost is not the constraint; the constraint is that the limit, not the fund, decides when it exits.
What would change it
If a later week closes below this week's open of 17,127.83, or the limit is hit again at the staged size, exposure stays where it is rather than being restored. If realised vol falls well below 61.5% for several weeks, the size steps can be widened.
What sets this case apart
The decision is not about direction but about sizing a re-entry so a mechanical limit stops cutting the fund at the worst prices.