Balanced portfolios tend to take a more directional bet on the market. By actively managing and rebalancing held and borrowed assets, a higher risk is accepted in return for a higher potential reward. In a balanced portfolio there is an active bet on specific market movements, whether through going long, or short on an asset.

The balanced portfolio is perfect for investors who:

  • Have strong bullish/bearish sentiment on an asset, and want to capitalize that.

  • Want to have the risk of loss / liquidation, in return for higher profit-potential.

  • Swing traders, that use DeltaPrime to negate the usual spread with farms.

Example strategy: Swing trader

In this strategy, a beginner swing trader is bullish on sAVAX, and wants to take a leveraged sAVAX position for ~3 months. Given his inexperience, he estimates his chances of trading profitably at 50%. Where on prior (decentralized) margin accounts he would slowly bleed money on spread and interest, he instead decides to utilize a strategy unique to DeltaPrime, flipping the expected value in his favor.

By depositing USDC, and borrowing USDC, the trader sets himself up for a long (s)AVAX strategy. Should he feel more bullish on BTC at one point, he can make a direct swap from sAVAX to BTC to gain exposure on BTC instead. Additionally, he can swap part for sAVAX and part for BTC, to further balance his portfolio. Balancing and rebalancing his portfolio he creates the exact, potentially amplified, exposure that best fits him.

Expected return

The trader deposits $30,000 USDC as collateral and borrows $90,000 USDC at a 5% interest rate. Swapping $120,000 USDC to $120,000 sAVAX, and farming it in a non-compounding pool for a total APR of 13% for three months, before closing the trade. Because he profits 50% of the times and makes a loss 50% of the times, and we assume those profits and losses are equal, we can negate any capital gains from his strategy as the expected value on that is 0. His RoI is:

\text{RoI} = {(3/12)*(0.13(120.000)-0.05(90.000))\over30.000} *100 \text{% = 9.25%}

In contrast to usual trading platforms, holding a trade for a longer period of time on DeltaPrime, if well managed, leads to a positive return. In this case, the trader makes an almost 10% return in 3 months, while still enjoying any capital gains made. Usually, the trader would pay 'tuition fees', in the form of losses. On DeltaPrime however, he can actively put his trades to work, learning while growing his portfolio.

The Health Meter

In this strategy you amplify your positions. Your health, as well as your profit/loss can change depending on the price-action of your borrowed and swapped asset. It is therefore important to either check-in regularly or to leave sufficient health to account for price swings in the market.

While partial liquidations help mitigate the negative effects, they are still unpleasant and should be avoided in order to prevent needless losses.

What to check?

Important note

  1. Because you amplify price changes, it is important to keep an eye on your collateral and health. Of course, you can mitigate this necessity by swapping borrowed assets, into assets with a higher correlation.

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