This makes sense, def need to re-evaluate the risk profile or use hedges.
We can also use 3x tokens like ETHBEAR to hedge a portfolio.
It’s just good to get the discussion going.
I don’t understand this very well. If only eth is hedged, then the hedge can only be one percent of the total eth. This is an operation summarized by actual operations.
No there are different options to hedge, like put options or even a 3x ETHBEAR token.
Also FYI, if you want responses to your statement, it’s best to provide translations on the post.
I like most of this. Although I wouldn’t call it conservative. I would change the 5% hedge. I would prefer this to be liquid: either in ETH, or an interest bearing ETH. This would be very conservative. However, just a matter of personal preference, I don’t touch options.
I’m very familiar with traditional market leveraged funds as I have had significant exposure to them for a long time. Assuming you pick the most liquid and predictable funds, you’ll be mostly fine.
I have been watching the leveraged bull/inverse tokens. On the surface it doesn’t seem that we would benefit much from this exposure of the bull/bear tokens. Liquidity is also poor.
The Hedge is primarily against downside risk. Since many of the farms will have some sort of volatile asset like ETH, we don’t want our portfolio going down 10% due to a drop in ETH. We’d like some protection against that just in case.
Yes, more research has to be done, but I appreciate that you want to move forward (me too). Specifically I need to rework some of the numbers and produce a solid plan on yield / risk.
Hedging with options of leveraged shorts will need some work to figure out the optimal way to produce the desired results. We will be using some sort of on chain option like Opyn if needed.
Also some mining rewards are ending(UNI) and/or decreasing, so that must also be accounted for.
Overall great work @feddas!
I understand that you want to move quickly but this treasury isn’t just yours or mine, it’s a collective, and sometimes it’s better to move slow and smooth than fast and hard.
We are at a low right now and the team did a good thing by buying a stablecoin yUSD rather than recklessly investing in other things. Now is time to organize and plan to utilize what YAM hodlers have sacrificed.
I am putting together a list of farms to research.
Anyone have pros/cons/insights of these:
Harvest.finance (not audited)
Pickle.finance (not audited)
I am familiar with these but wanted to reach out to the community for feedback.
Thanks in advance.
We have taken the first step, we are in the process of purchasing Defi Pulse Index on Tokensets.com. Should be available shortly.
Been working on the hedging with options or 3x leveraged short tokens. Let me know what you guys think:
Using options to hedge will cost approx 60% APY on the Hedged amount of ETH but it has upside potential ie. If the (price+farming yield) of the covered ETH goes above 60% APY it is all gains
Worse case senario is that the price does not move at all and it costs you 60% APY, so if we can get the total farm APY up to 60%, this cost is covered as well.
Using 3x leveraged tokens that rebalance daily (FTX ETHBEAR) will cost you ~11%APY but no upside if ETH goes up. There’s a possibility it costs more if ETH goes up and down and price stays the same (worse case secenario due to rebalancing daily)
Hedge https://opyn.co/#/buy Put Options Pricing Days from till exp Cost per Cost % Gain per day Cost
Expiry Strike Price Current WETH Price Protection Cost To Break Even 10/14/2020 Day Including Strike to Cover Cost APY
Oct 16th 2020 04:00 EDT 320 $375.06 0.813 $375.87 2 0.4065 27.9365 0.1083827% 39.560%
Oct 23rd 2020 04:00 EDT 330 $375.06 4.7974 $379.86 9 0.533044444 5.539711111 0.1421224% 51.875%
Oct 30th 2020 04:00 EDT 360 $375.06 15.09 $390.15 16 0.943125 1.884375 0.2514598% 91.783%
Oct 30th 2020 04:00 EDT 320 $375.06 8.5128 $383.57 16 0.53205 3.9733 0.1418573% 51.778%
Dec 25th 2020 03:00 EST 360 $375.06 42.9086 $417.97 73 0.587789041 0.794090411 0.1567187% 57.202%
If you can achieve 57%+ APY yield/gain on ETH you can cover the cost of the options, so no downside risk, only upside
Leveraged Short Tokens
Tokens also charge a daily management fee of 0.03% or 11%APY
ETHBear Tokens 3x Short
Leveraged tokens rebalance once per day and whenever they get 4x levered.
Because of the daily rebalancing, leveraged tokens will reduce risk when they lose and reinvest profits when they win.
BTC daily prices BTC 3x BTC BTCBULL
10k, 11k, 10k 0% 0% -5.45%
10k, 11k, 12.1k 21% 63% 69%
10k, 9.5k, 9k -10% -30% -28.40%
Let’s say we have full coverage on ETH, there is still a 11% APY management fee.
No upside potential on ETH
Sorry for the botched cut and paste job, I’ll throw this up on discord.