Market Neutral Strategy
Market-Neutral Strategy (Pseudo-Delta-Neutral Strategy) is a leveraged yield farming technique. With this strategy, you can earn high APY on your pairs while reducing your risk by hedging out market exposure.
Example Illustration:
Total Deposit: $400 USDC
Borrow USDC - LONG ETH
Action: Borrow $200 USDC
Explanation:
Use $100 USDC from your deposit.
Borrow an additional $200 USDC.
Total Position Value: $300 USDC
LP Setting: 50% USDC, 50% Borrowed
Cost in ETH for LONG Position: $150
Borrow ETH - SHORT ETH
Action: Borrow $600 worth of ETH
Explanation:
Utilize 300 USDC from your deposit.
Borrow $600 worth of ETH.
Total Position Value: $900 USDC
LP Setting: 50% USDC, 50% Borrowed
Cost in ETH for SHORT Position: $150
Hedging: Achieving a Market-Neutral Position
The Market Neutral Strategy focuses on balancing both long and short exposures to achieve a market-neutral position. The process involves these steps:
Start with a deposit of assets.
Borrow USDC and ETH as needed to open both a long and a short position.
Achieve a market-neutral stance through effective hedging of both exposures.
By employing this strategy, you can benefit from high APY on your paired assets while minimizing risk through hedging techniques.
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