Why and when rebalancing to Pseudo-Delta Neutral strategy?

  • Impermanent Loss(IL) is materialized. Rebalancing will cause some losses if the price returns to the initial level, but non-rebalancing will not, and it will bear more losses when the price continues to fluctuate.
  • Avoid long or short position exposure immediately, and if the price of non-stable asset keeps dump or pump, no losses would be generated from such exposures;
  • No liquidation risk, the maximum loss is limited even in the case of severe price pumping or dumping. See the following Backtesting of case 1and case 2;
  • When the APR reaches a certain level(60%+), it can still maintain a considerable income even the price decreases by 80+%.

Principles and Scenarios

How to rebalance

  • If the leverage is lower than the target leverage ratio
  • If the leverage is greater than the target leverage ratio, withdraw and redeposit without leverage to bring it down to the target leverage ratio; borrow more assets if necessary.

Backtesting Data

Backtesting from Francium:

  • FarmingAPR: 30%
  • Lending Interest: USDC 10%; SOL 14%
  • Principal: $1000
  • Rebalance debt ratio: 68%
  • Performance: -3.3%
  • Rebalance debt ratio: 70%
  • Performance: Final -1.3%
  • Without the rebalancing mechanism, the position would be liquidated at around $74. Profit -100%,
  • Under the rebalancing mechanism, the maximum loss is within 8% at +620% price pump. The maximum debt ratio is 70%.

$SOL, 2021.10.1–2022.2.28(5 months)

  • FarmingAPR: 30%
  • Lending Interest: USDC 10%; SOL 14%
  • Principal: $1000
  • Rebalance debt ratio: 68%
  • Performance: 4.3%; Almost no loss in this time range.
  • Rebalance debt ratio: 70%
  • Performance: 4.4%; Almost no loss in this time range.
  • When the price fluctuates between +84% and -36%, the return is positive throughout;
  • In the case of a 65.4% price drop from the peak, the retracement of position value is around 3%;
  • Compared with Case 1 and Case 2, it can be seen that the position is easy to maintain a profitable state without a particularly large pump.

$RAY, 2021.10.1–2022.2.28(5 months)

  • FarmingAPR: 60%
  • Lending Interest: USDC 10%; RAY 55%
  • Principal: $1000
  • Rebalance debt ratio: 68%
  • Performance: +25.3%; No loss period in this time range.
  • Rebalance debt ratio: 70%
  • Performance: +27.2%; No loss period in this time range.
  • When the price fluctuates between +31% and -74%, the return is positive throughout;
  • Under the current APR situation, the backtesting of position value is very small when the price drops sharply;
  • Compared with the case of $SOL, it can be seen that the profit data increases significantly when the underlying APR increases.

$ORCA, 2021.10.1–2022.2.28(5 months)

  • FarmingAPR: 60%
  • Lending Interest: USDC 10%; ORCA 48%
  • Principal: $1000
  • Rebalance debt ratio: 68%
  • Performance: +24.7%; No loss period in this time range.
  • Rebalance debt ratio: 70%
  • Performance: +18.2%; No loss period in this time range.
  • When the price fluctuates between +14.7% and -85%, the return has almost always been positive;
  • Under the current APR situation, the backtesting of position value is very small when the price drops sharply;
  • Compared with the case of $RAY, it can be seen that the price falls further and the position can still maintain profits.

Backtesting from Community:

DarkRay#9557 -

AR#7381 -

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Francium

Francium

1.1K Followers

Francium is a leveraged yield farming protocol that supports diverse yield strategies. Discord: http://discord.gg/francium