Delta-Neutral Strategies

Pool creators can create pools enabling delta-neutral. A delta-neutral strategy is a type of investment strategy that involves offsetting long and short positions in a way that minimizes the overall delta or value change in the portfolio or position.

If a pool has ETH-USDC LP as collateral with ETH as a borrowable asset, users can set up delta-neutral position by depositing the ETH-USDC LP token (long position) and borrowing ETH to market sell (short position). When the price of ETH goes up, the LP token increases in value but ETH becomes more expensive to buy back in order to pay back the borrowed ETH.

Alternatively, when the price of ETH goes down, the LP token decreases in value but ETH becomes cheaper to buy back to pay back the loan.

If structured properly, the respective value increases and decreases of the respective long and short positions will be matched so that regardless of price movement, the overall position value will remain the same.

This allows users to earn trading fees and farming rewards without worrying about price changes in ETH. Thus, a delta neutral position.

Delta-neutral strategies are complex strategy and may not be suitable for all investors. It is always a good idea to consult with a financial advisor before making any significant investment decisions.

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