Delta-Neutral LP
Last updated
Last updated
Description
Deploys delta-neutral liquidity to AMM liquidity pool and rebalances as price moves to limit impermanent loss.
The hedged AMM market-making strategy enables users to seamlessly borrow a volatile asset from a lending protocol and provide it as LP (along with a stable asset) to a Uniswap-like DEX.
USDC-ETH strategy would automatically execute the following actions on the user's behalf once they deposit USDC:
The strategy uses a portion of the USDC deposits as collateral in a lending protocol like Compound
Borrows ETH against the USDC collateral
Provides both USDC & borrowed ETH as liquidity to a Uniswap exchange
Rebalances borrowed amounts to match LP amounts as prices shift
Because ETH was borrowed, if the price of ETH goes down, the user's overall balance is not impacted (the borrowed ETH will be returned if the user decides to withdraw). Our strategy uses automated trading bots that ensure the amount of ETH provided to the DEX remains as close as possible to the amount borrowed. This results in a delta-neutral position, meaning our portfolio is largely unaffected by the price of ETH going up or down.
