# Levered USD & ETH Carry

## Overview

By taking advantage of stablecoin inherent neutrality (i.e. all stablecoins are designed to maintain a peg), you can earn interest differentials between `USD` lending markets and `ETH` borrow markets.

`ETH` borrows can be hedged by holding `ETH` which is then swapped for `rETH` to earn additional `ETH` yields. This `rETH` portion can be sold at anytime to cover any potential `ETH` debt.

## Strategy

The strategy consists of 2 positions:

* **Leveraged short `USD`/`ETH`:** By looping `ETH` borrows against `USD` supply, you can earn the difference between `USD` supply interest and `ETH` borrow interest.
* **Leveraged long rETH/ETH:** By looping `ETH` borrows against `rETH` suply, you can earn the difference between `rETH`liquid staking yields and `ETH`borrows.

By combining the two positions above, there is minimal exchange risks as the `ETH`debt is always covered by the `rETH`portion. 

### Protocol Parameters

{% tabs %}
{% tab title="Aave" %}

* Max LTV for `USD`: 75%
* Average `USD` supply interest: 6-9%
* `ETH` borrow interest: 2.3%
  {% endtab %}

{% tab title="Compound" %}

* Max LTV for rETH on ETH market: 90%
* ETH borrow interest: 2.14%
* COMP reward on ETH borrow: 0.51%
  {% endtab %}

{% tab title="Rocket Pool" %}

* Liquid staking APR: 2.6%
  {% endtab %}
  {% endtabs %}

{% hint style="info" %}
For ease of reference, the example below assumes a starting capital of $100 `USD` and an even split between the 2 positions.
{% endhint %}

### Create a 2x leveraged short USD/ETH position

#### **Steps**

1. Flash loan $50 `USD` amount from Balancer
2. Lend $100 `USD` on Aave
3. Borrow $50 `ETH`

#### **Results**

{% tabs %}
{% tab title="Balances" %}

* Collateral: $100 `USD` lent 
* Debt: $50 `ETH` borrowed (50% LTV)
* Net Collateral: $50 `USD`
  {% endtab %}

{% tab title="Interest" %}

* Net on starting capital: 7.85% `USD`
* Net on borrowed amount: 6.7% `USD` (9% `USD` supply - 2.3% `ETH` borrow)
  {% endtab %}
  {% endtabs %}

### Create a 5.3x leveraged long rETH/ETH position

#### Steps

1. Swap $50 `USD` for `rETH`
2. Flash loan $215 `rETH` (5.3x max lev with 10% buffer) from Balancer
3. Lend $265 `rETH` on Compound
4. Borrow $215 `ETH`
5. Swap `ETH` for `rETH` to repay flash loan

#### Results

{% tabs %}
{% tab title="Balances" %}

* Collateral: $265 `rETH` lent
* Debt: $215 `ETH` borrowed (81% LTV)
* Net collateral: $50 `rETH`
  {% endtab %}

{% tab title="Interest" %}

* Net on starting capital: 
  * 2.29% `ETH`
  * 1.35% `COMP`
    {% endtab %}
    {% endtabs %}

### Final result

The net yields for this strategy are as follows:

* 7.85% `USD`
* 2.29% `ETH`
* 1.35% `COMP`

This is a blended \~11.5% yield which is an additional 2.5% yield as compared to just a pure USD lending strategy (i.e. a 24% yield improvement).


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.factor.fi/getting-started/strategy-explainers/delta-neutral-yields/levered-usd-and-eth-carry.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.