GLP Delta Neutral Strategy — Vaultka-GLP Vault
Deep Dive into Vaultka-GLP DN Vault
The recent narratives of the DeFi space are Real Yield and Delta Neutral (DN), given the bearish market condition. GLP Delta Neutral strategy is gaining momentum. After meticulous backtesting and research by Vaultka, the team aims to provide a Delta Neutral vault using GLP as the underlying strategy.
To put more granularity, there are three sources that contributed to the yield of GLP:
- Trading Volume of GMX
- Short-term mispricing of GLP token
- Price movement of GLP’s underlying assets
In essence, holding GLP token is tantamount to longing GLP underlyings, namely, BTC, ETH, LINK, UNI and stablecoins on Arbitrum. Hence, there would be positive delta exposure on those assets.
In Vaultka-GLP vault, the vault will be hedging the price movement of BTC and ETH, which have demonstrated 97% correlation of delta drift of GLP token, hence providing a pseudo-delta-neutral GLP vault for our users.
With Vaultka-GLP DN vault, users are empowered to capture the increasing trading volume of GMX perpetual trading platform, without the exposure of volatile assets.
Mechanics:
The Vaultka-GLP strategy is comprised of two vaults: :
- Vodka vault
The Vokda vault would be a Delta-neutral vault that holds GLP with a hedged short position. Vaultka-GLP vault hedged the BTC and ETH exposure. Vault will be receiving ETH reward and esGMX reward from GMX liquidity provision and liquidation fee, and a boosted return with auto-compounding.
- Water vault
The Water vault would empower secure return by providing USDC on AAVE that acts as collateral on AAVE, which will be able to receive AAVE supply APR, and a percentage of ETH reward of Vodka vault.
The approach that Vaultka neutralizes the positive delta exposure of holding GLP, would be by introducing negative delta exposure with a short position. Vaultka team decided to utilize Balancer to perform flash loans, deposit capital supplied by Water vault in addition to the flash loan amount into AAVE, and repay flash loan using AAVE over-collateralized loan. That essentially creates a short position that could counteract with GLP positive delta exposure, resulting in delta neutral.
The implementation steps are as follows:
- Vodka Vault creates position
- Vaultka-GLP performs Flash Loan on Balancer
- Convert Flash Loan BTC and ETH to USDC
- Deposit USDC and Water vault capital(USDC) into AAVE
- Borrow BTC and ETH against the deposited fund from AAVE
- Repay flash loan to Balancer
- Monitor the Health Ratio
Such implementations have been tested meticulously with edge cases and stress tests by Vaultka team.
Features:
- Best Hedging Algorithm
With Vaultka team meticulous backtesting and stress test prior to the development stage, Vaultka-GLP vault is able to offer the best hedging algorithm with optimized parameter threshold and frequency. Hence, Vaultka-GLP vault minimized the delta exposure deviation, and provides the most secure GLP DN vault for users.
- Optimized Rebalance Mechanism
Vaultka team have optimized the rebalance implementation that will enable a lower rebalance fee and hence a higher return for Vaultka-GLP users. The development team utilize assembly code for such optimization. In addition, Vaultka team performed a comprehensive backtesting to refine the parameters, which will enable best rebalance performance.
- Risk Management
Vaultka team are DeFi-native and have insitution trading background, we incorporate the risk management measure into our smart contract, such as safety modules and backstop mechanism, which would offer higher security for Vaultka-GLP users.
- Auto-compounding
For GLP holder, manual harvest and re-deposit are tedious and time-consuming, also the cost of such operation is high. By leveraging Vaultka-GLP vault, the cost of auto-compounding is much lower, as the rebalancing cost is spread across of users, and utilized automation.
We are Vaultka — The ultimate vault for all DeFi strategies
Vaultka will empower and increase stablecoin-like yield of stablecoin holders, offering a wide spectrum of vault strategies that aims to provide products that suit the community.
With our automated processes for our strategies, users will be hassle-free. Let Vaultka handle all the complexity for you.
Website: https://www.vaultka.com/
Twitter: https://twitter.com/Vaultkaofficial
