Delta Neutral Yields

Overview

In finance, delta refers to the sensitivity of a strategy's value to changes in the underlying asset price. Achieving delta neutrality means that whichever the price direction of the underlying asset, the strategy's value always remain the same.

Delta neutrality is made possible by combining Long and Short positions. This is achievable as any upside/downside risks are hedged against each other resulting in a delta neutral strategy. As such a delta neutral strategy shields the strategy from short term market volatility.

The reason for such a strategy is that it is possible to yield farm across DeFi while ensuring that any downside (and by extension, any upside) risks are neutralized. As such, delta neutral strategies generate yields regardless of the market direction.

Leverage Positions

You can learn more about Long and Short positions in our Leverage Strategy Explainer.