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Investing strategies

None of the strategies shown below should be interpreted as financial advice. While strategies shown can be very profitable, there is always an inherent risk in investments. Always Do Your Own Research before investing.

Investing strategies

Investing can go further than simply swapping or staking tokens. Advanced investors tend to combine a multitude of financial instruments to manage their risk and generate more profit. Because DeltaPrime integrates a multitude of DeFi protocols, combining instruments is easier than ever. Below is a list of possible investing strategies usable within DeltaPrime. Although nowhere near exhaustive, this list might inspire you to find your own strategies.

Simple strategies

Shorting

What is it?

If you short on DeltaPrime, you trade your borrowed funds for a stablecoin. By shorting you reverse the usual way of making profit, by making money on the token value going down instead of up. You should short tokens when you expect the value of a token to go down. Shorting is also used as a way to hedge risks, as explained in upcoming strategies.

How do I do it?

  1. 2.
    Borrow
  2. 3.
    swap collateral + (part of) borrowed funds for stablecoin

Potential returns

example:
LTV = 400%
Percentage shorted / Token Price
Price - 10%
Price + 10%
25%
+ 12.5%
-12.5%
50%
+ 25%
-25%
100%
+ 50%
-50%
This table shows the potential returns of shorting with an LTV of 400%.
eg. if you short 100% of tokens in your Prime Account and the price drops by 10%, you make a profit of 50% your collateral.
Borrowing APY and gas fees are not taken into account in this calculation. Depending on the size, gas fees are negligible and the total borrowing fee is dependent on the duration of your position.
Collateral + Loan in AVAX has a Total Value of ~$2000 with an LTV of ~455%. 1950 USDC worth $1950 has been bought, shorting AVAX by 96.6%.

Delta neutral strategies

Delta neutral strategies are strategies that reduce price risk to 0. This means that whether or not the strategy is profitable, is in no way dependent on the direction or magnitude of price movements of the underlying asset(s). Delta neutral strategies are based on hedging, meaning the acquisition of an opposite, equal position. The reduction of risk typically goes hand in hand with the reduction of reward. For this reason delta neutral strategies tend not to be very attractive for low capital investments, instead appealing mostly to whales. Providing you with extra capital for your investments, DeltaPrime is perfectly suited to make the delta neutral strategy a great choice for the retail investor. DeltaPrime is the perfect place to set up low risk / high reward delta neutral strategies.
If this sounds complicated, don't worry! Below are step by step tutorials on how to set up delta neutral strategies on DeltaPrime.

The Hedged Stake

What is it?

Hedging is the reduction of your risk by taking an opposite position. In DeltaPrime you can hedge your staking position by shorting your collateral, only staking your loan. This strategy can be very effective since, as long as your borrowing APY is lower than your staking APY, your max risk is the gas fees you are paying. Your max potential reward on the other end is infinite, depending on the difference in the two APYs.

How do I do it?

  1. 1.
    Short your collateral
  2. 2.
    Stake what is left
The collateral is 100% hedged, by shorting the exact amount of AVAX put in as collateral. As long as I keep the rest in AVAX, I can't lose more than gas fees.
All borrowed funds are being staked. As long as my staking APY (here 9.00%) is higher than my borrowing APY (here 4.85%), I make profits!

Potential returns

Token (T) price = $100 Collateral: 10T Borrowed: 40T Borrow APY = 6.00% Staking APY = 9.00%
Timeframe / Token price
Price / 10 ($10)
Same price ($100)
Price * 10 ($1000)
1 month
+ $3.80
+ $38
+ $380
1 year
+ $12
+$120
+$1200
This table shows the returns in dollars of hedging your stake with a 3% difference in APY. The bigger the APY difference, the higher the profits. Even if the token price falls to zero, you will get back your collateral.
As long as the borrowing APY is lower than the staking APY, you are making net profit! The longer you stake, the higher your profit.
This calculation does not take into account gas fees (approx $5).

Potential strategies

This is a list of potential strategies based on a combination of planned integrations. This list is ever expanding and consists of delta neutral strategies, delta mitigating strategies and delta morphing strategies. Whenever a strategy is usable on DeltaPrime, it will be removed from this list and explained in one of the sections above.
Got a (potential) strategy you want to share with the community? Let us know!
The Floating FarmSimple LP Hedgebasic index LP hedgeC-DiveToken-Token Pool Dive