Factor Docs
  • 🏭Introduction to Factor
  • Getting Started
    • đŸ•šī¸Quickstart
    • 🔗Supported Protocols
    • 🔐Strategy Cheatsheet
      • Swaps Cheatsheet
        • Conditional Market Order
        • Automated Market Order
        • Multi Swap
        • Automated Swap & Earn
        • Automated Scale Order
        • Scale Order Partial Fill Yield
        • Interest On Pending Trades
        • Leverage Trade
        • Leverage DCA
      • Lending Cheatsheet
        • Lending Pool Zap
        • Multi Lend
        • Market Making To Lending Switch
        • Earn Negative Interest
        • Carry Trade
        • Leveraged Staking Yields
        • Leveraged Fixed Yields
      • Borrowing Cheatsheet
        • Collateralized Borrow
        • Collateralized Borrow Zap
        • Multi Borrow
        • Debt Switching
        • Automated Debt Readjustments
        • Debt Refinancing
        • Asset Switching
      • Liquidity Provision Cheatsheet
        • Liquidity Pool Zap
        • Yield Farm Zap
        • Automated LP Adjustments
        • Yield Farm Adjustments
      • Flash Loan Cheatsheet
    • 🧠Strategy Explainers
      • Leverage
        • Leverage Performance Modelling
        • Leverage Long Simulation
        • Leverage Short Simulation
      • Yield
        • Yield Performance Modelling
      • PT Strategies
        • Leverage Long PT Simulation
      • Delta Neutral Yields
        • Levered USD & ETH Carry
    • 📖Glossary
  • Factor Discover
    • 🔍Factor Discover
      • Public Strategies User Guides
        • Deposit Into User Created Strategies
        • Withdraw From User Created Strategies
      • Leverage User Guides
        • Create A Leveraged Position
        • Adjust Position Leverage
        • Add Collateral To Position
        • Withdraw Collateral From Position
        • Repay Position Debt
      • Yield User Guides
        • Auto-compound Your Yields
      • PT User Guides
        • Redeem Your PT
      • APY Calculations
    • âš™ī¸Factor Operated Strategies
      • Yield Type Strategies
        • Additional rETH Yields On USDC Lend
        • Amplified rETH Yields On USDC Lend
        • Additional Liquid Staked ETH Yields On USDC Lend
        • Additional Liquid Restaked ETH Yields On USDC Lend
      • Trading Type Strategies
        • WBTC Base Switch On rETH For ETH & USDC Yields
      • Delta Neutral Type Strategies
        • Delta Neutral ETH With rETH & USDC Yields
  • Factor Studio
    • 🎨Factor Studio
      • Automated Strategies
      • Conditional Strategies
    • 🏠Private Strategies
      • User Guide
        • Private Strategy Creation
    • đŸ‘ĨPublic Strategies
      • User Guide
        • Public Strategy Creation
        • Create An Exit Strategy
        • Making Your Strategy Public
        • Strategy Execution
      • Security
      • Exit Strategy
    • đŸ—ī¸Strategy Builder
      • Building Blocks User Guide
        • Lend
        • Borrow
        • Swap
        • Flash Loan
    • 📜Studio Contracts
      • Leverage
        • FactorLeverageDescriptor.sol
        • FactorLeverageVault.sol
        • WrapperFactorLeverageVault.sol
      • LP Management
        • FactorLPVault.sol
        • FactorLPDescriptor.sol
  • Factor SDK
    • đŸ“ĻFactor SDK
    • â†”ī¸REST APIs
      • Utility APIs
        • Pricing
        • Stats
  • Factor Building Blocks
    • 🧱Factor Building Blocks
    • âžĄī¸Lend
    • âŦ…ī¸Borrow
    • 🔄Leverage
      • Concepts
        • Collateralized Lending & Borrowing
        • Looping
      • Leverage Dev Guides
        • Create Leveraged Position
        • Add Leverage To Position
      • Strategy Contracts
        • AAVEV3LeverageStrategy.sol
        • CompoundLeverageStrategy.sol
        • LodeStarLeverageStrategy.sol
        • RadiantLeverageStrategy.sol
        • SiloLeverageStrategy.sol
        • SiloYieldTokenStrategy.sol
        • TenderLeverageStrategy.sol
      • FAQ - Leverage Building Block
    • 💰Yield
      • Concepts
        • Yield Farming
        • Yield Aggregators
      • ⚡Zap
    • 🌊LP Management
      • Concepts
        • Automated Market Maker
        • Concentrated Liquidity
    • đŸĨŠStake
    • 🔀Swap
      • Concepts
        • Market Orders
        • DEX Aggregators
    • đŸĒ„Flash Loan
      • Concepts
        • Uncollateralized Lending & Borrowing
        • Flash Loan
  • Factor Adapters
    • 🔌Factor Adapters
    • 📜Adapter Contracts
      • Leverage
      • Yield
      • Swap
      • Flash Loan
  • Governance
    • đŸ›ī¸FactorDAO
      • Factor Flywheel
      • Factor Participants
      • Governance Incentive Calculations
        • FactorDAO Incentives Model (LTIPP)
      • User Guides
        • Stake FCTR
        • Governance Migration
      • Contracts
        • FactorDAO Contract Addresses
      • FactorDAO Multisig Addresses
      • Platform Fees
    • đŸĒ™FCTR Token
      • Staking and Governance
      • Tokenomics
      • Contract Addresses
      • FAQ - Tokenomics
    • âš–ī¸Factor Scale
      • Arbitrum Foundation LTIPP
      • Emission Multiplier Calculations
        • Emissions Multiplier Model
      • User Guides
        • Stake FCTR
        • Vote On Emissions Distribution
      • Contracts
        • Factor Scale Contract Addresses
      • ❔FAQ - Factor Scale
    • 🚀Factor Boost
      • Contracts
        • Factor Boost Contract Addresses
    • đŸ’ŧFactor Bribes
      • Contracts
        • Factor Bribes Contracts
  • Security
    • đŸ›Ąī¸Security
    • 📋Audits
      • PeckShield
        • Leverage Vault Wrapper
        • Silo Yield
        • Silo Leverage
        • Penpie
        • Factor Boost
      • SourceHat
        • FactorDAO Vaults
        • FCTR & Voting Escrow
  • Reference
    • Discover Pro dApp
    • Studio dApp
    • Discover dApp
    • Official Website
    • Press Kit
    • Partnership Form
    • Media Kit
    • Geo Restrictions
  • Community
    • Factor Contributors
    • X
    • Discord
    • Telegram
    • Medium
    • Email Enquiries
Powered by GitBook
On this page
  • PT Overview
  • PT Strategies
  • PT Leverage Strategies
  • PT Yield Strategies

Was this helpful?

  1. Getting Started
  2. Strategy Explainers

PT Strategies

PreviousYield Performance ModellingNextLeverage Long PT Simulation

Last updated 10 months ago

Was this helpful?

Pendle Yield Tokenization

PT Strategies refer to DeFi strategies which utilize (i.e. PT). Through splitting yield-bearing assets into various tokens, Pendle enables users to earn a fixed yield by holding Principal Tokens till maturity or speculate on the variable yields through trading Yield Tokens.

Please visit for further info on the yield tokenization mechanics.

PT Overview

Pendle's (PT) enables users to earn a fixed yield by holding the newly acquired PT until the stated maturity date. This means that instead of worrying about changes in yield over time, users can lock in fixed returns at a specified future date by holding PT. The fixed return is represented as a discount on PT (i.e. locked in at acquisition) which enables holders to claim the accounting asset at a 1:1 ratio on the maturity date.

The example below provides an intuitive understanding of PT returns for different yield token types:

Yields from interest-bearing assets are realized as an increase in the value of the token.

  1. Bloxy has 1 which represents 1 restaked ETH that is earning both Ethereum Mainnet PoS rewards and ETH restaking yields.

  2. At the beginning of the year (i.e. 01JAN2023) Bloxy exchanges 1 weETH for 1.1 PT-weETH-01JAN2024 which matures at the beginning of the next year (i.e. 01JAN2024).

  3. By holding 1.1 PT-weETH-01JAN2024 until maturity (i.e. 1 Jan 2024), Bloxy is able to redeem 1.1 ETH worth of PT-weETH at the stated date.

Yields from rebasing tokens are realized as an increase in the total number of tokens held.

  1. Bloxy has 1 which represents a share of ETH that is staked via Lido (i.e. staked ETH and staking rewards).

  2. At the beginning of the year (i.e. 01JAN2023) Bloxy exchanges 1 stETH for 1.1 PT-stETH-01JAN2024 which matures at the beginning of the next year (i.e. 01JAN2024).

  3. By holding until maturity (i.e. 1 Jan 2024), Bloxy is able to redeem 1.1 PT-stETH-01JAN2024 for 1.1 stETH at the stated date.

The discounted PT in step 2 above comes about due to:

  • Opportunity Costs: To get the indicated returns at the point of exchanging TKN for PT-TKN, users must hold PT until maturity.

  • Price Of Certainty: PT holders are selling their claim to any upside in yields whereby the yields accrued by the underlying asset are still liable to change as it is traded on the open market.

In effect, PT holders are going short (i.e. bearish) on the yield portion of the yield-bearing asset. In other words, PT holders expect that the amount of yield generated until maturity will be less than the discount received when exchanging TKN for PT-TKN.

If 1 PT-TKN enables you to claim 1.1TKN at the maturity date, exchanging your TKN for PT-TKN means that you expect the total yield accrued during the maturity period to be less than 0.1TKN. Additionally, you can hold PT-TKN to ensure that you get a fixed 0.1TKN return at maturity and not have to worry about yield fluctuations for that period.

Get Started With PT Strategies!

You can visit our if you would like to get started with amplified PT yields.

PT Strategies

Strategies utilizing PT takes advantage of the fixed income nature of PT whereby the value of a PT-TKN is always approaching that of its accounting asset at maturity date. To see why this is the case, remember that PT-TKN can be redeemed 1:1 for the accounting asset (i.e. TKN) on maturity.

The above means that the PT-TKN discount declines towards zero on maturity as the yield portion of the yield-bearing asset (i.e. YT) becomes increasingly insignificant. In other words, the shorter the time to maturity, the less time there is for yield to accrue hence the lower the PT discount. This is why PT with longer maturity periods are able to command higher fixed APYs (in addition to having a longer holding period).

PT Fixed APYs

As a PT holder that has no intention to trade, the most important thing to note is that the expected fixed return from holding PT is only realized as real returns on the maturity date. While PT can be traded, it does not accrue any yield and only allows redemption of the accounting asset on maturity.

Consequently, the expected returns is "locked in" based on when TKN was swapped for PT-TKN.

PT Leverage Strategies

By lending PT-TKN and borrowing TKN (i.e. Long PT), the fixed income nature of PT ensures that the value of the collateral (i.e. PT-TKN) is always increasing relative to debt (i.e. TKN). Barring any black swan events, this ensures that the position never becomes undercollateralized.

The additional TKNs borrowed can then be swapped for more PT-TKN and supplied to the lending pool thereby increasing exposure to the PT's fixed returns on maturity (i.e. you are holding more PT based on the initial portfolio value). This process can be repeated with the fixed returns being "locked in" with each TKN to PT-TKN swap.

Leverage Strategies Explained

To ensure a sustainable lending and borrowing market, lending pools specify both a Supply APY and Borrow APY. PT-TKN supplied will earn a Supply APY while TKN borrowed will incur a Borrow APY. As a PT leverage strategy depositor, the Borrow APY is the cost of maintaining your leveraged exposure to PT-TKN.

As PT returns are only realized on maturity, any changes to your leveraged position before the maturity date will have varying effects based on the market conditions. For example, removing your leverage results in your PT-TKNs being sold at the current market price which can be either higher if yields have been increasing since you initially acquired PT or less if yields have been decreasing.

Due to the inherent complexity with managing PT strategies, it is recommended that the PT leveraged position be held until maturity to realize the fixed returns. Leveraged PT strategies are profitable as long as the Fixed APY at which you acquired PT is greater than the average Borrow APY during the maturity period.

Look Out For:

PT Yield Strategies

Auto-compounding strategies take advantage of yield farming rewards which are provided to LP token holders. To incentivize adoption of PT, protocols will provide additional rewards which are external to PT performance. This includes the claiming of governance tokens as well as liquidity incentive tokens.

Yield Strategies Explained

PT yield strategies forego any trading risks and instead enable you to grow your initial LP token holdings by regularly harvesting all accrued rewards and swapping for more LP tokens. By automating this harvest and swap routine, your rewards can be compounded as you gain incrementally more LP tokens with each cycle.

Auto-compounding immediately swaps all available rewards for LP tokens at each execution cycle hence the amount of PT acquired will be dependent on the market conditions. Critically, as PT rewards are only realized at maturity, each subsequent PT swap will have gradually less discount as it gets closer to maturity. Put simply, your newly acquire PT fixed returns will generally reduce with every compounding cycle.

PT yield strategies are a good way to increase your fixed returns without any downside risks as compared to just holding your initial LP token amount. Moreover, by consistently swapping your accrued reward tokens for LP tokens, you reduce your reward token exposure risks due to the reduced reward token holding times.

Look Out For:

It is critical to note that TKN to PT-TKN swaps can also happen in reverse as Pendle provides a for trading of all the tokenized yield equivalents. Consequently, the price of TKN:PT-TKN is dependent on the current market conditions (i.e. do yield traders believe that the yield accrued by TKN until the maturity date is more or less than the current discount).

Please view our if you would like a deeper dive into the design of the standard leverage strategy.

Please view our if you would like a deeper dive into how yields can be auto-compounded.

🧠
Pendle's Principal Token
Pendle Docs
Principal Token
weETH
stETH
PT User Guides
market
Leverage Strategy Explainer
Yield Strategy Explainer