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Delta Neutral Strategies

Delta Neutral Strategies

These strategies long and short an asset at the same time. That way, the strategies isn't exposed to price changes of the asset, but can farm rewards of 3rd party protocols.
Example: You buy 1000$ worth of BTC (long), and borrow 1000$ worth of BTC that you sell (short). If the price of Bitcoin moves up, you make money on the BTC that you are long, and a loss on the BTC that you short - overall the value of your assets stays the same. Same happens when the price of Bitcoin goes down, just in reverse.

Vector TraderJoe USDC-AVAX

Protocols & Pools Used: TraderJoe - AVAX-USDC Pool
AAVE - AVAX Pool
Description: The strategy supplies USDC as collateral to Aave and borrows AVAX. Then it provides AVAX and USDC as liquidity in a traderJoe liquidity pool. The traderJoe LP tokens are then staked on Vector Finance. The strategy periodically reaps the rewards from Vector Finance and reinvests them in the strategy.
Risks:
  • Liquidation risk on Aave (monitored and mitigated by brokkr's offchain component)
  • Standard smart contract risks
  • USDC depeg risk
Emergency Exit Thresholds
  • Aave collateral ratio drops below 125%
  • TVL in the strategy should be at most 1/3 of the TVL in TraderJoe USDC/AVAX pool (constant monitoring)
  • USDC price drops 3 - 5% (constant monitoring)
  • Malicious governance proposals; like sudden increase in total supply of TraderJoe token or big reduction of LTV maximum on Aave (constant monitoring on discord channel “proposal-pages”)
  • TraderJoe or Aave protocol get hacked (constant monitoring on TraderJoe and Aave Discord announcements and Twitter)
  • TraderJoe or Aave protocol get exploited (constant monitoring on TraderJoe Discord announcements and Twitter)