Timing the market is tough, even for experienced traders.

But what if you could benefit from DeFi Spring STRK rewards without worrying about price swings? That’s exactly what delta-neutral strategies let you do.

A delta-neutral strategy is all about balance. The idea? Hedge one position with another so that changes in an asset’s price don’t affect your portfolio. Instead of betting on price movement, you’re focused on earning yield.

💡 Keep in mind:

• Delta-neutral reduces market risk, but not other risks like smart contract issues and liquidation risks still apply.

• The strategy is immune to price moves overall, but individual positions aren’t. They can still be liquidated if not managed properly.

Always stay informed, monitor your positions, and invest responsibly!

Let’s walk through how you can create a delta-neutral strategy on Vesu, using $10,000 in USDC as an example.

Prerequisites:

• Understanding of basic DeFi concepts & risks

• Capital to invest

• A connected wallet with STRK or ETH to pay for transactions

• Deposit 10,000 USDC

• Borrow 2 ETH

You’ve created a short position on ETH. If ETH's price rises, your debt value increases, which could lead to liquidation. If ETH's price falls, your debt becomes cheaper to repay, improving your position.

Note: The LTV ratio will be improved after creating Position 2.

• Deposit: 2 ETH from Position #1

• Borrow: 2,000 USDC

This creates a long position on ETH, increasing your exposure to ETH price movements. If ETH’s price rises, the value of your collateral increases. However, if it falls, your collateral could drop too close to your debt value, increasing liquidation risk.

Take the 2,000 USDC borrowed in Position #2 and add it back as collateral to Position #1 (navigate to vesu.xyz/positions and select “Modify”).This improves the Loan-to-Value (LTV) ratio of Position #1, reducing liquidation risk and increasing the USDC earning yield in Position #1.

In this example, the delta-neutrality comes from the fact that:

• Long and short ETH positions are balanced: You hold the same amount of ETH as collateral and debt in both positions.

• Price movements offset each other: If the price of ETH rises, the value of the collateral in Position 1 will increase, but so will the value of the debt in Position 2, effectively canceling each other out.

• Focus on the yield: The goal is to earn yield on both ETH and USDC, not to speculate on the price of ETH.

• Cost to Borrow per month: $9.99 + $0.54 = $10.53

• Yield per month: $36.22 + $138.09 = $174.31

• Total Net Yield per month: $163.78

1. Earning Only: Deposit 10k USDC at 13.5% APY = $115/month
   USDC's organic yield is elevated due to high utilization, but it may decrease as market conditions change.

2. Multiply Strategy: Deposit 10k USDC, multiply 2x with ETH, resulting in 27.45% APY = $274.88/month
   This strategy results in a short ETH position! If ETH’s price increases, you risk losses or risk liquidation.

While this strategy reduces market risk, it's not risk-free. Keep a close eye on these key factors:

1. Loan-to-Value (LTV) Ratios: Regularly check the LTV for both positions to avoid liquidation.

2. Borrowing Costs vs. Yield: Ensure your earned yield exceeds borrowing costs. Remember, these rates may fluctuate if market utilization changes.

3. Market Volatility: Although the strategy is delta-neutral, sudden market shifts can still impact individual positions.

When you’re ready to exit, it’s straightforward:

1. Withdraw the $2,000 USDC from Position #1.

2. Use this USDC to repay and close Position #2. This will return your 2 ETH collateral.

3. Finally, repay the 2 ETH debt in Position #1 and withdraw your $10,000 USDC.

Delta-neutral strategies on Vesu let you earn STRK rewards during DeFi Spring while keeping market risks low. By carefully managing your positions and following this guide, you can create a stable, yield-generating strategy that works in any market condition.

Get started on Vesu today! Set up your delta-neutral position and enjoy the rewards of stable, risk-managed returns.