Delta Neutral ETH With rETH & USDC Yields

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Description

https://studio.factor.fi/?hash=0xd2e21a69f28fdfa35c61b8308a18bed944f4c87fc8979836b85709881f925928

By combining 2 opposing Long and Short positions, this strategy earns yields while maintaining its value throughout short term market volatility. A fall in ETH’s price is covered by a short ETH position and vice versa.

Half of the USDC deposited is used to create a 2x USDC/ETH Short position with a 20% liquidation buffer. This earns 1x USDC lending interest (on initial deposit amount) with a 0.5x ETH borrow position. If ETH price drops relative to USDC, the debt owed decreases and vice versa.

To offset the risks of increasing debt on the USDC/ETH short position, the remaining USDC deposited is swapped for rETH. The upside exposure of holding rETH cancels out the downside exposure of the ETH debt from the above short USDC/ETH position. Additionally, rETH continues to earn liquid staking yields which historically has been above the ETH borrow interest.

+ USDC Supply Interest

+ rETH Liquid Staking Yields

+ rETH Supply Interest

- ETH Borrow Interest

Strategy

Main strategy

1. Create 2x USDC/ETH Short

   1. Flash loan 2x of 50% $USDC balance

   2. Lend 50% initial $USDC + flash loaned $USDC amount

   3. Borrow $ETH to cover flash loan

   4. Swap $ETH → $USDC

2. Swap 50% $USDC deposit for $rETH

Exit Strategy

1. Close remaining debt

2. Swap all to withdraw token

Exit Strategy

Factor Discover also enables Depositors to permissionlessly withdraw from any strategy at anytime via an Exit Strategy.

Visit our Exit Strategy explainer to see how Factor Studio strategies can maximize returns while ensuring truly permissionless withdrawals.

Protocol Parameters

Aave

• ~6% USDC Supply Interest

• ~0.02% rETH Supply Interest

• ~2.4% WETH Borrow Interest

• 75% USDC Max LTV

• 69% rETH Max LTV

Rocket Pool

• ~2.7% rETH Liquid Staking Yields

OpenOcean

• 0.1% Max Slippage Config

Strategy Performance Conditions

Profit

• USDC supply interest and rETH liquid staking yields are greater than WETH borrow costs.

• rETH price continuously increases relative to WETH.

Loss

• Long term WETH borrow costs is greater than USDC supply interest and rETH liquid staking yields.

• rETH depegs from ETH.

Calculation Template

Create Your Own Strategies!

Create a copy of the sheet below and tweak it to create your own personalized strategy.

https://docs.google.com/spreadsheets/d/1q7QjmHZJHceg6Hw9291LVLXN0N2b_ht06tpsD9CbDzo/edit?usp=sharing

Estimated Returns

https://docs.google.com/spreadsheets/d/14X58mVppX6Sa2SlJ5KQ3E8J6iPtxT9xHAtzlylu4X6w/edit?usp=sharing