Method · 30 July 2026 · 11 min
Your range is a forecast
Picking bounds means predicting where the price will sit. Most LPs do it by accident.
When you set bounds on a concentrated position, you have made a claim about the future distribution of the price. Most people set them by dragging a slider until the projected yield looks appealing. That is still a forecast; it is just one nobody has written down.
What the bounds are saying
A band from 172 to 197 says: I expect the price to spend the great majority of the next window inside this interval, and I am willing to be net short the move if it leaves the top and net long if it leaves the bottom. Narrow the band and you have raised your confidence. Widen it and you have lowered it — and diluted your capital across ground the price may never cover.
This is why a single band cannot be right for every market. A pair that moves half a percent a day and one that moves eight are not asking the same question, and answering both with ±5% means being wrong twice in opposite directions.
Sizing to the weather
The obvious estimator is realised volatility, and the obvious mistake is measuring it over one horizon. An hour of calm inside a violent week produces a band that will be broken before the next block; a week of calm ending in a shock produces a band that is far too wide for the days that follow. We measure three horizons and weight the short one most, with a floor that no amount of quiet can push through.
The second input is depth. Fee income is not a function of the band alone; it is a function of the share of the pool's liquidity the vault owns at the ticks the trades actually cross. Placing capital where the book is already three deep earns a third of what the same capital earns where it is the only offer. The band is chosen with that in view, which sometimes means declining to sit exactly on top of the price.
Choosing bounds is choosing a distribution. Do it on purpose.