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Delta Neutral Strategy with Staking & Yield Tokens

· 2 min read
Taurus
Taurus
DePerp Labs

Delta

An In-Depth Analysis​

You've purchased 1 ETH at a spot price of $3,000 and simultaneously opened a short position for 1 ETH at the same price. Additionally, you're leveraging your ETH in liquid staking to earn supplementary rewards. Let's delve into how this strategy can impact your overall financial position.

Advantages of a Neutral Position with Liquid Staking:​

  • Market Risk Mitigation: Regardless of ETH price fluctuations, your core assets and liabilities remain balanced.
  • Additional Income: Liquid staking enables you to earn rewards, such as staking points or interest, enhancing your overall profitability.

Example with Positive Funding Rate:​

If ETH price rises to $3,500:

  • Long Position Profit: $500
  • Short Position Loss: $500
  • Plus Positive Funding (e.g., 0.01% per hour for 24 hours): $7.20
  • Staking Income (assuming 5% annual yield): Approx. $0.41 per day
  • Net Result: $500 - $500 + $7.20 + $0.41 = +$7.61

Example with Negative Funding Rate:​

If funding rate is negative (0.01% per hour for 24 hours):

  • Long Position Profit: $500
  • Short Position Loss: $500
  • Minus Negative Funding: $7.20
  • Staking Income (assuming 5% annual yield): Approx. $0.41 per day
  • Net Result: $500 - $500 - $7.20 + $0.41 = -$6.79

Risks:​

  • Negative Funding: Increases losses on the short position.
  • Liquidation Risks: Rapid price surges can trigger short position liquidations, leading to further losses.
  • Staking Risks: Liquid staking might involve risks like asset lock-ups or reduced yields.

Conclusion:​

An ETH neutral position combined with liquid staking aids in managing market risks while simultaneously earning staking rewards. Positive funding rates on DePerp enhance your income, whereas negative rates reduce it, though staking earnings can partially offset these costs.

Exploring Further:​

Is it possible to short liquid staking tokens and use them as collateral for opening positions? DePerp is advancing in this domain, positioning itself as a multi-collateral platform recognizing the substantial potential in delta-neutral strategies for liquid staking tokens and yield tokens.

Analyze Funding Rates Aggregated by Coinglass​

For more detailed insights on funding rates, refer to the Coinglass Funding Rate Heat Map.

Open Long or Short Positions​

To execute your strategies, open positions on DePerp.

Liquid Staking for Ethereum​

To explore dApps and platforms offering liquid staking for Ethereum, visit the Ethereum dApps page.