# Table of Contents - [Welcome | Boros](#welcome-boros) - [Interest Rate Accounting and Settlement | Boros Docs | Boros](#interest-rate-accounting-and-settlement-boros-docs-boros) - [Interest Rate Trading (YU Trading) | Boros Docs | Boros](#interest-rate-trading-yu-trading-boros-docs-boros) - [Boros Overview | Boros Docs | Boros](#boros-overview-boros-docs-boros) - [Protective mechanisms | Boros Docs | Boros](#protective-mechanisms-boros-docs-boros) - [Glossary | Boros Docs | Boros](#glossary-boros-docs-boros) - [Boros Referral Program | Boros Docs | Boros](#boros-referral-program-boros-docs-boros) - [Vaults | Boros Docs | Boros](#vaults-boros-docs-boros) - [Fees | Boros Docs | Boros](#fees-boros-docs-boros) - [Order Book | Boros Docs | Boros](#order-book-boros-docs-boros) - [Detailed Calculations on Margin and Liquidations | Boros Docs | Boros](#detailed-calculations-on-margin-and-liquidations-boros-docs-boros) - [Chapter 2 - Implied APR and Underlying APR | Boros](#chapter-2-implied-apr-and-underlying-apr-boros) - [Chapter 5 - Long Rates | Boros](#chapter-5-long-rates-boros) - [Chapter 4 - Settlement | Boros](#chapter-4-settlement-boros) - [Chapter 6 - Short Rates | Boros](#chapter-6-short-rates-boros) - [Hedging Funding Rates Payment | Boros](#hedging-funding-rates-payment-boros) - [Chapter 7 - Margin and Liquidations | Boros](#chapter-7-margin-and-liquidations-boros) - [TLDR: How to Win | Boros](#tldr-how-to-win-boros) - [Implied APR vs Futures Premium | Boros](#implied-apr-vs-futures-premium-boros) - [Fixed Funding Rates Receivables | Boros](#fixed-funding-rates-receivables-boros) - [Margin and Liquidations | Boros Docs | Boros](#margin-and-liquidations-boros-docs-boros) - [Chapter 3 - Opening and Closing a Position | Boros](#chapter-3-opening-and-closing-a-position-boros) - [Chapter 0 - Understanding Funding Rates | Boros](#chapter-0-understanding-funding-rates-boros) - [Chapter 1 - Yield Units (YU) | Boros](#chapter-1-yield-units-yu-boros) - [Start Here | Pendle Academy](#start-here-pendle-academy) - [Chapter 1 - Introduction to Optimizing Yield | Pendle Academy](#chapter-1-introduction-to-optimizing-yield-pendle-academy) - [Pendle 101 - Key Takeaways | Pendle Academy](#pendle-101-key-takeaways-pendle-academy) - [Chapter 2 - Yield Tokenization Basics | Pendle Academy](#chapter-2-yield-tokenization-basics-pendle-academy) - [Chapter 3.2 - More Yield via Liquidity Provision | Pendle Academy](#chapter-3-2-more-yield-via-liquidity-provision-pendle-academy) - [Chapter 3.1 - Fixed Yield on Pendle | Pendle Academy](#chapter-3-1-fixed-yield-on-pendle-pendle-academy) - [Chapter 5 - Important concepts in yield trading | Pendle Academy](#chapter-5-important-concepts-in-yield-trading-pendle-academy) - [Optimizing Yields with Pendle - Key Takeaways | Pendle Academy](#optimizing-yields-with-pendle-key-takeaways-pendle-academy) - [Chapter 4 - Yield Trading Basics with YT | Pendle Academy](#chapter-4-yield-trading-basics-with-yt-pendle-academy) - [Chapter 7 - Providing Liquidity while Trading Yield | Pendle Academy](#chapter-7-providing-liquidity-while-trading-yield-pendle-academy) - [Withdrawals / Deposits from Other Chains | Pendle Academy](#withdrawals-deposits-from-other-chains-pendle-academy) - [Chapter 9 - Identifying Opportunities to Long/Short Yield | Pendle Academy](#chapter-9-identifying-opportunities-to-long-short-yield-pendle-academy) - [Points Trading | Pendle Academy](#points-trading-pendle-academy) - [Chapter 6 - Shorting Yield | Pendle Academy](#chapter-6-shorting-yield-pendle-academy) - [PT / YT / LP Cheatsheet | Pendle Academy](#pt-yt-lp-cheatsheet-pendle-academy) - [Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure) | Pendle Academy](#chapter-8-long-yield-obtain-leveraged-yield-exposure-pendle-academy) - [Points Support Page | Pendle Academy](#points-support-page-pendle-academy) --- # Welcome | Boros ![Page cover](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fw9X1xxe6rB0bIKhILy8r%252Fimage.png%3Falt%3Dmedia%26token%3D11269d5b-eb04-48fd-8e49-78d413008903&width=1248&dpr=3&quality=100&sign=1a1d4791&sv=2) Welcome to Boros Academy! Boros is a yield-trading platform on margin by Pendle. Curious how you can take advantage of Boros? Read on! This Academy covers all you need to know to understand and use Boros. To learn more about the _protocol mechanics_, check out the [docsarrow-up-right](https://pendle.gitbook.io/boros/boros-docs) . ![Cover](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FJekRRnSrdudihNdPlFxM%252FSimple.png%3Falt%3Dmedia%26token%3Db911f38e-577e-484e-aac5-444373328323&width=490&dpr=3&quality=100&sign=c3e6e602&sv=2) Learn the Basics [The Basics](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates) ![Cover](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FgSi6ObZuxHWxaJ15ZFFh%252FPro.png%3Falt%3Dmedia%26token%3D86c9489c-30e5-451d-b830-f8e96cfbb61e&width=490&dpr=3&quality=100&sign=d7705547&sv=2) For the Pros [Advanced Strategies](https://pendle.gitbook.io/boros/advanced-strategies/hedging-funding-rates-payment) [NextChapter 0 - Understanding Funding Rateschevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates) Last updated 8 months ago --- # Interest Rate Accounting and Settlement | Boros Docs | Boros Currently, Boros facilitates trading in Yield Units (YUs) of funding rates, with settlement intervals that mirror the underlying market’s schedule. For example: * On Binance, funding rates are settled every 8 hours. Correspondingly, Binance YUs on Boros are settled on the same 8-hour schedule. * For Hyperliquid, funding rates are settled every hour, thus Hyperliquid YUs on Boros are also settled hourly. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FAtgh11h4rhufdQyQYjnJ%252Fimage.png%3Falt%3Dmedia%26token%3Dc5bb65b7-34eb-408c-a55e-1b3ba49f3146&width=768&dpr=3&quality=100&sign=22190ff9&sv=2) At each settlement period, Boros obtains the underlying APR (funding rate) via an oracle and settles it against every user’s fixed APR. A user’s fixed APR is determined by the average implied APR upon opening a position. When the user opens a new position, the new fixed APR is the average implied APR of opening the position. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-accounting/interest-rate-accounting-and-settlement#at-every-settlement) At every settlement Boros settles the underlying rate against every user’s fixed rate. 1. **Long YU:** the user **pays fixed APR and receives the underlying APR** (essentially betting on the underlying rate being HIGHER than the fixed payments). For example, if the user opened a long YU position at an implied APR of 8% and the underlying APR is currently 10%, they will receive rates of 2% (scaled down to the settlement period). 2. **Short YU:** the user **pays the underlying APR and receives a fixed APR** (essentially betting on the underlying rate being LOWER than the fixed payments). For example, if the user opened a short YU position at implied APR of 20% and the underlying rate is currently 25%, they will lose rates of 5% (scaled down to the settlement period). The difference in the underlying and fixed APR is realized and will be reflected in every user’s collateral. 1. Positions that received more than they paid will see an increase in their collateral value. 2. Positions that received less than they paid will see a decline in their collateral value. Assuming the implied APR remains the same, the position’s value declines as a portion of the position is already realized into the collateral (i.e. YU’s value declines as there are less yield remaining to settle until maturity). The maintenance margin also declines as the position is now worth less than before the settlement (i.e. since the value of each YU is now lower, less margin is now required to maintain the same position). Maintenance margin will decline until the margin floor. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-accounting/interest-rate-accounting-and-settlement#at-maturity) At maturity 1. Total position value is zero as the whole position is already realized. 2. Collateral is fully freed. [PreviousGlossarychevron-left](https://pendle.gitbook.io/boros/boros-docs/about-boros/glossary) [NextInterest Rate Trading (YU Trading)chevron-right](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading) Last updated 11 months ago --- # Interest Rate Trading (YU Trading) | Boros Docs | Boros [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#implied-apr-and-fixed-apr) Implied APR and Fixed APR --------------------------------------------------------------------------------------------------------------------------------------------------------------------- **Implied APR is the price of YU, denoted in percentage terms**. It can also be referred to as the market consensus of the future APR of an asset. It is used in conjunction with the underlying APR to make decisions on whether to long / short YU. When a user opens a long / short position on YU for the first time at the current implied APR, that implied APR becomes the fixed APR payable / receivable until maturity. Note that implied APR is the “price” of YU, which means it is directly correlated to your position value. Upon opening a position, the “value” of the position is affected by implied APR changes. In other words, if implied APR goes up, traders with a long position will see an increase in their position value and traders with a short position will see a decrease in their position value. In other words, a high implied APR can mean that the YU is “expensive”, and a low implied APR can mean that the YU is “cheap”. For yield traders with a shorter time horizon, the concept of “buy-low-sell-high” is totally applicable here, where they can enter a long position when implied APR is low, and close the position when it goes up. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#long-yu) Long YU circle-info Pay fixed APR, receive underlying APR. A long YU position pays a fixed APR to receive the underlying APR. Essentially, it is a long position on the underlying APR, betting that receiving underlying APR outperforms the fixed APR payables. **Upon opening a new long position on YU, the current implied APR becomes the fixed APR payable until maturity.** Since implied APR is the “price” of the yield rate, the current implied APR directly affects your total position value. If implied APR goes up, the total position value on a long position goes up, and vice versa (i.e. price go up, your long position value go up). circle-info Long YU positions bet on: 1. Underlying rate > fixed rate, or 2. Implied APR going up (i.e. YU price going up) ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#short-yu) Short YU circle-info Pay underlying APR, receive fixed APR. A short YU position pays the underlying APR to receive a fixed APR. Essentially, it is a short position on the underlying APR, betting that underlying APR payable is less the fixed rate received. **Upon opening a new short position, the current implied APR becomes the fixed APR receivable until maturity.** Since implied APR is the “price” of the yield rate, the current implied APR directly affects your total position value. If implied APR goes up, the total position value on a short position goes down, and vice versa. circle-info Short YU positions bet on: 1. Underlying rate < fixed rate, or 2. Implied APR going down (i.e. YU price going down) [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#opening-a-position) Opening a Position ------------------------------------------------------------------------------------------------------------------------------------------------------- 1. To open a position on Boros, select the desired market. 2. Deposit the collateral of the desired market or zone. 3. Enter the desired size of the position (either long / short position) 4. Execute a market order or place your order on the order book. 5. Position will be opened when the order is filled. [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#closing-a-position) Closing a Position ------------------------------------------------------------------------------------------------------------------------------------------------------- You can close a position by clicking the “close position” button, which works by opening the opposite of the currently open position. If you have a long position open, the position will be closed by opening an equivalent short position, and vice versa. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FstuRPxF1qokRYWSTAtTO%252Fimage.png%3Falt%3Dmedia%26token%3Dc0dc2eed-df96-4ad7-825a-4ef6a3418cda&width=768&dpr=3&quality=100&sign=c9273059&sv=2) This is because the underlying APR payment / receivables from opposite positions cancels each other out, leaving the position with an aggregate fixed APR payment / receivables. Since a fixed APR payment / receivables to maturity is deterministic, Boros can immediately settle the position into your collateral. [PreviousInterest Rate Accounting and Settlementchevron-left](https://pendle.gitbook.io/boros/boros-docs/interest-rate-accounting/interest-rate-accounting-and-settlement) [NextOrder Bookchevron-right](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/order-book) Last updated 11 months ago --- # Boros Overview | Boros Docs | Boros Boros is a yield-trading platform on margin by Pendle. Currently, Boros offers the trading of funding-rates from various avenues, including off-chain funding-rates from centralized exchanges. In the future, Boros will expand to support trading yields of different categories. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252Ftz5rqwHj00xCkekCt6Zt%252Fimage.png%3Falt%3Dmedia%26token%3D2f77c1ab-32d0-42cd-9559-40801f0ca809&width=768&dpr=3&quality=100&sign=4296a5a4&sv=2) Boros enables traders to express their view on funding rates. Those bullish on funding rates can open a long position whereas bears can open a short position. Boros also enables those with a floating funding rate exposure to hedge their funding rates payment / receivables. There are 3 main components within Boros: ### [hashtag](https://pendle.gitbook.io/boros/boros-docs#id-1.-interest-rate-accounting) 1\. Interest Rate Accounting To trade a yield of a given asset, Boros has to first obtain its yield-rate via an oracle (e.g. Binance BTCUSDT funding rate, $ATOM staking rate, etc). This yield is referred to as the “Underlying Yield” as the number is obtained from the yield of the underlying asset. circle-info As long as there is an oracle feed for a yield percentage, the asset can be supported on Boros. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs#id-2.-interest-rate-trading-yu-trading) 2\. Interest Rate Trading (YU trading) **Boros enables the trading of interest rates by representing a floating-yield stream into YU (yield unit).** Each YU represents the yield of 1 unit of the collateral asset in the underlying yield bearing asset. For example, in a BTCUSDT(Hyperliquid) market on Boros with BTC as collateral, each YU in this market represents the funding rate of 1 BTC in Hyperliquid. Some use cases: 1. A trader bullish on funding-rate can enter a long position on YU. This position is effectively paying the implied APR in a fixed-stream in exchange for the current funding-rate (i.e. the underlying APR of YU). If the funding-rate yield is higher than the fixed-stream payments, the trader is in profit. 2. A BTC/USDT Binance perp trader can hedge their funding-rate payments by turning it into a fixed-stream payment. To achieve that, they can enter a long position on YU-BTCUSDT(Binance). This is achieved by paying a fixed stream to receive a floating stream of the underlying BTC/USDT funding rate. The results in the trader hedging the funding rate payment into a fixed payment until maturity. 3. A trader with a cash and carry position via perps can lock-in the current rates offered on Boros by entering a short-yield position. A cash and carry position receives funding-rate yields from the perps market. The trader can receive fixed yield by paying the current floating-stream (of funding rates) in exchange for the current fixed-stream payment. The net result of the position is a fixed-yield position until maturity. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs#id-3.-margin-liquidations-and-risk-parameters) 3\. Margin, Liquidations and Risk Parameters To open a position on Boros, you have to place collaterals based on the desired asset. After which you can either open a long / short position on Boros. If your net balance falls under the maintenance margin, the position will be open for liquidation. [NextGlossarychevron-right](https://pendle.gitbook.io/boros/boros-docs/about-boros/glossary) Last updated 3 months ago --- # Protective mechanisms | Boros Docs | Boros There a few mechanisms in place to mitigate risks for the users and Boros' system. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/protective-mechanisms#oi-cap) OI Cap * There is a hard cap on the OI of any market * To get the value from market API: * OI Cap = `**hardOICap**`**/**`**1e18**` ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/protective-mechanisms#closing-only-mode) Closing Only Mode * When the market dynamics becomes too extreme (for example, abnormally high price volatility or low liquidity), the Closing Only Mode will be automatically turned on * When Closing Only Mode is on, users will only be able to close existing positions (and not open new positions) ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/protective-mechanisms#max-rate-deviation) Max Rate Deviation * The system disallows any market trade that happens at a rate too far away from the current mark rate. * If a trade exceeds this limit, an error “Large Rate Deviation” will be displayed on the UI * The exact requirement is as follows: ∣markRate−rateTraded∣≤maxRateDeviationFactor×max(markRate,RateFloor)|markRate - rateTraded| \\leq maxRateDeviationFactor \\times max(markRate, RateFloor)∣markRate−rateTraded∣≤maxRateDeviationFactor×max(markRate,RateFloor) * `maxRateDeviationFactor` = `**maxRateDeviationFactorBase1e4**` **/** `**1e4**` * where `**maxRateDeviationFactorBase1e4**` is from the market API ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/protective-mechanisms#max-bounds-on-limit-order-rates) Max Bounds on Limit Order rates * When placing a limit order, a user can’t long at a rate too high above the mark rate, or short at a rate too low below the mark rate. * The exact mechanics is this: * A long order rate must not exceed _f__u_ * A short order rate must not be lower than _f__l_ fu(rm)\={rm×upperLimitSloperm≥Ithresholdrm+upperLimitConstant0≤rm Boros' vault mechanism is advanced and is out of scope for most users. For those curious to dive deeper, you can read our whitepaper \[here\] (). ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/vaults#risks) Risks Boros vaults behave similarly to a **Uniswap V2 LP position** of “long YU” and “collateral”. This means vault depositors are effectively taking a **long-biased position on YU**, which benefits from high or rising implied APRs. However, if the implied APR declines after you have deposited, your vault position may suffer **impermanent loss (IL)** —especially if it was opened at a high APR level. Before depositing, consider the **current implied APR**. A high implied APR may result in a high historical vault performance, but could also make your entry more vulnerable to drawdowns and IL. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/vaults#yields) Yields Vaults generate returns through: * **PENDLE incentives** * **Swap fees from market order flow** * **Favorable Implied APR movements**, which increase the value of your vault position. triangle-exclamation Opening a Boros vault position is similar in risk profile to going **long YU**. If the implied APR drops after you enter, you may experience impermanent loss, which will be **realized when you exit** the vault. [PreviousOrder Bookchevron-left](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/order-book) [NextFeeschevron-right](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/fees) Last updated 9 months ago --- # Fees | Boros Docs | Boros Positions on Boros can have different fees based on their behavior. Refer to the info tab of each pool for more details. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FIQZSkWyxyv0fOYEzN2Ks%252Fimage.png%3Falt%3Dmedia%26token%3D3f7e1cc4-5045-4add-bf01-d7da6ddeeb60&width=768&dpr=3&quality=100&sign=cd3bd643&sv=2) ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/fees#id-1.-swap-fees) 1\. Swap Fees Boros collects a flat fee on top of the implied APR for every swap. Swap fee will be deducted from the position’s collateral. For example, in a market with a swap fee tier of 0.05%, the fee for opening a position equals 0.05% × YU amount × Years to Maturity. In other words, traders will pay 0.05% fee on the $ value of their position. In this scenario, traders will profit if implied APR changes by more than 0.1% in their favor (assuming no yield settlement happens throughout the period), as traders will have to open and close the position, incurring 2x the swap fee. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/fees#id-2.-open-interest-fees) 2\. Open Interest Fees Boros collects a flat fee on the fixed APR side of every YU during settlement. For example, positions at an 8% fixed rate with a fee tier of 0.1%: * Long YU positions effectively pay 8.1% in fixed APR. * Short YU positions effectively receive 7.9% in fixed APR. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/fees#id-3.-operation-fees) 3\. Operation Fees Boros charges a small fixed fee on your first transaction and then intermittently (approximately every ~50 transactions) thereafter. This fee, usually around $1 during normal gas conditions, is used to cover the gas costs of executing trades from your address. [PreviousVaultschevron-left](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/vaults) [NextMargin and Liquidationschevron-right](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations) Last updated 3 days ago --- # Order Book | Boros Docs | Boros Orders on Boros are placed on Implied APR of the asset, which is the yield denominated price of the asset. Learn more [here](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#implied-apr-and-fixed-apr) . [hashtag](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/order-book#order-types) **Order types:** ------------------------------------------------------------------------------------------------------------------------ * Market: Order executes immediately in order of the best prices in the order book. * Limit: Order executes at the selected limit price or better. Limit orders on Pendle are Good Til Cancel (GTC) orders, which means they will be available in the order book until it is filled or cancelled. The order book will be closed at maturity and all orders will automatically be cancelled. [PreviousInterest Rate Trading (YU Trading)chevron-left](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading) [NextVaultschevron-right](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/vaults) Last updated 11 months ago --- # Detailed Calculations on Margin and Liquidations | Boros Docs | Boros [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/detailed-calculations-on-margin-and-liquidations#initial-margin-im) Initial Margin (IM) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- * Overview: Initial Margin is the margin a user needs to open a new position * Variables: * `k``IM`: Initial Margin Factor, a setting specific to each market * `s`: Notional Size * `t`: Time to maturity (in years) * `TimeFloor`: floor for time to maturity, a setting specific to each market * `RateFloor`: floor for Mark Rate, a setting specific to each market * Formula: IM\=kIM×∣s∣×max(t,TimeFloor)×max(markRate,RateFloor)IM = k\_{IM} \\times |s| \\times max(t, TimeFloor) \\times max(markRate, RateFloor)IM\=kIM​×∣s∣×max(t,TimeFloor)×max(markRate,RateFloor) * A user is able to open a new limit order or market order, if their total Initial Margin is less than their Net Balance, or they are closing their existing position [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/detailed-calculations-on-margin-and-liquidations#maintenance-margin-mm) Maintenance Margin (MM) ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- * Overview: Maintenance Margin is the margin a user needs to have to maintain a position (and not be liquidated) * Variables: * `k``MM`: Maintenance Margin Factor, a setting specific to each market * `s`: Notional Size * `t`: Time to maturity (in years) * `TimeFloor`: floor for time to maturity, a setting specific to each market * `RateFloor`: floor for Mark Rate, a setting specific to each market * Formula: MM\=kMM×∣s∣×max(t,TimeFloor)×max(markRate,RateFloor)MM = k\_{MM} \\times |s| \\times max(t, TimeFloor) \\times max(markRate, RateFloor)MM\=kMM​×∣s∣×max(t,TimeFloor)×max(markRate,RateFloor) * To get the settings from the API: * API: [https://api.boros.finance/core/docs#/Markets/MarketsController\_getMarketInfoarrow-up-right](https://api.boros.finance/core/docs#/Markets/MarketsController_getMarketInfo) * Notes on how to get settings from the API: * TimeFloor: `**tThresh**` from the API, divided by 365\*_24\*_3600 * RateFloor: * `1.00005^(iTickThresh*tickStep) - 1` [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/detailed-calculations-on-margin-and-liquidations#liquidation) Liquidation --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- * Overview: a user is liquidated in a collateral zone if their Net Balance goes below Maintenance Margin * When a liquidation happens, the user’s position is closed at the mark rate, and the user loses an liquidation penalty of: LiquidationPenalty\=k∗maintenanceMarginOfLiquidatedPositionLiquidationPenalty = k \* maintenanceMarginOfLiquidatedPositionLiquidationPenalty\=k∗maintenanceMarginOfLiquidatedPosition * Where k will start from 25% when a position just become liquidate-able and increases linearly to 50% when the position becomes more and more unhealthy (and still not liquidated) [PreviousMargin and Liquidationschevron-left](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations) [NextProtective mechanismschevron-right](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/protective-mechanisms) Last updated 4 months ago --- # Chapter 2 - Implied APR and Underlying APR | Boros Trading on Boros shares similarities with trading on perpetuals exchanges (perps), but with a twist. Instead of betting on the price movements of assets, Boros traders bet on the movements of yield. On a typical perp exchange: * A long position profits when the asset's _price_ rises after opening a position. * A short position profits when the asset's _price_ falls after opening a position. On Boros: * A long position in YU benefits when the _implied APR_ increases after opening a position. * A short position in YU benefits when the _implied APR_ decreases after opening a position. In other words, YU on Boros also has a _price_, denoted in yield terms. This is called “Implied APR”, essentially the _price_ that you pay to receive the underlying yield of the asset. Just like how the price of BTC is the market’s valuation of the asset, Implied APR on Boros can be thought of as the market’s expectation on what the average yield of the asset is going to be until maturity. circle-check The Implied APR of a YU can also be thought of as the market consensus on what the average yield of the asset is going to be until maturity (assuming a rational market). [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr#understanding-implied-apr) Understanding Implied APR ------------------------------------------------------------------------------------------------------------------------------------------------------- **Upon entering a position, the Implied APR at that point in time locks in as your Fixed APR until maturity.** This rate remains constant, regardless of any future fluctuations in the Implied APR. Long YU example: Suppose the current Implied APR of YU-ETHUSDT-Binance is 5%, by entering a _**long**_ position: * You commit to paying 5% APR until maturity, or until the position is closed * Any subsequent changes in the Implied APR, decrease or increase, will NOT affect your locked-in rate (i.e. Fixed APR) Short YU example: Conversely, suppose the current Implied APR of YU-ETHUSDT-Binance is 5%, by entering a _**short**_ position: * You will receive 5% APR until maturity, or until the position is closed * Any subsequent changes in the Implied APR, decrease or increase, will NOT affect your locked-in rate (i.e. Fixed APR) circle-exclamation Notice that Implied APR is the “price” of YU, and when you open a long position on YU, you are paying the implied APR at the point of entry, which is the “price”. This is similar to when you open a long position on BTC, you are paying the price of BTC at the point of entry. Vice versa for a short position. [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr#understanding-underlying-apr) Understanding Underlying APR ------------------------------------------------------------------------------------------------------------------------------------------------------------- ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fu0Ugjq0g9luo9q0sYiNL%252Fimage.png%3Falt%3Dmedia%26token%3Ddf5c5939-27b8-46ed-bbf9-0da7bdbfc74e&width=768&dpr=3&quality=100&sign=bd9a635c&sv=2) When you hold a long position on a YU, you receive the APR of the underlying asset. This is referred to as the “Underlying APR”. For instance, if you hold a long position in 2 YU-BTCUSDT-Hyperliquid, you receive the yield from funding rate 2 BTC on Hyperliquid. The key to trading YU effectively lies in comparing the current market's Implied APR to your expectations for the Underlying APR until maturity. circle-check **Long YU:** If the current Implied APR is lower than your expectations of Underlying APR, it suggests that the YU might be undervalued or cheap. **Short YU:** Conversely, if the current Implied APR is higher than your expectations Underlying APR, it suggests that the YU might be overvalued or expensive. * * * [PreviousChapter 1 - Yield Units (YU)chevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu) [NextChapter 3 - Opening and Closing a Positionchevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-3-opening-and-closing-a-position) Last updated 9 months ago --- # Chapter 5 - Long Rates | Boros When trading on Boros, if you expect the funding rate of, for instance, BTCUSDT-Binance to increase, you would enter a long position on its YU. Here’s how you can profit from a long position in YU: 1. Increase in Underlying APR 2. Increase in Implied APR [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-5-long-rates#increase-in-underlying-apr) Increase in Underlying APR ------------------------------------------------------------------------------------------------------------------------------------- ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FRpeEUCjQ99wtGgP6sX1X%252Fimage.png%3Falt%3Dmedia%26token%3D1326a787-60eb-4531-9cba-69c383b71e96&width=768&dpr=3&quality=100&sign=17f014b7&sv=2) In a long position, you are essentially speculating that the Underlying APR will exceed the Fixed APR (determined by the average Implied APR at the time of entry) that you have committed to paying. This Underlying APR represents the actual yield you will receive during the position’s duration. During each settlement, you receive yield based on the YU’s Underlying APR (i.e. the funding rate). For BTCUSDT-Binance, this would be the funding rate payments from this market. You profit when the total yield earned (Underlying APR) surpasses the total yield you have paid (Fixed APR). **For example:** Peepo enters a long position in 2 YU-BTCUSDT-Binance at 10% Implied APR. This means that Peepo has committed to paying a 10% Fixed Rate, while receiving the Underlying APR (funding rate payments) equivalent to a 2 BTC position in Binance BTCUSDT. At maturity (or when the position is closed), if the average Underlying APR > average Implied APR upon entry, Peepo will profit. In other words, Peepo will have collected more yield than what he will have paid. _Total Profit = (Underlying Yield Collected - Fixed Yield Paid)_ [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-5-long-rates#increase-in-implied-apr) Increase in Implied APR ------------------------------------------------------------------------------------------------------------------------------- Note that Implied APR is the price of YU. This is akin to the principle of “buy low, sell high”. A trader with BTC, for instance, can profit by selling off BTC at a higher price. Similarly, you can also profit by closing your YU position and “selling off” when its Implied APR (essentially its price) increases. **For example:** Peepo enters a long position in 2 YU-BTCUSDT-Binance at 10% Implied APR. After 3 rounds of settlement, Implied APR of YU-BTCUSDT-Binance increases to 15% Implied APR. At this point, Peepo could opt to sell off his YUs (i.e. close his position) before maturity at a higher price. _Total Profit = (Underlying Yield Collected - Fixed Yield Paid)+ Profit from YU Sale_ Instead of holding to maturity, this strategy leverages market timing to exit your position when the Implied APR (market value of YU) is higher than your entry, allowing you to capture both: 1. Yield Profits 2. Capital Appreciation [PreviousChapter 4 - Settlementchevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement) [NextChapter 6 - Short Rateschevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-6-short-rates) Last updated 11 months ago --- # Chapter 4 - Settlement | Boros [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement#yield-settlement) Yield Settlement ----------------------------------------------------------------------------------------------------------------- Boros currently supports trading of Funding Rates which are typically settled periodically. On Boros, yields are settled periodically at the same time as the underlying perp DEX’s funding rate settlement. For example, funding rates on Binance are settled every 8 hours; consequently, rates on Boros for the Binance pools are also settled every 8 hours. Similarly, Hyperliquid funding rates are settled hourly, and Boros rates for these pools follow the same hourly settlement schedule. You get the idea. #### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement#how-settlement-works) How Settlement Works Using an 8h settlement interval for example: every 8 hours, Boros settles the underlying rate against every user’s fixed rate. The difference between these rates will be settled and reflected in the users’ collateral (the rates’ difference is taken at the point of settlement, i.e. a single snapshot). At Every Settlement → Pay Receive **Long YU** Implied APR (fixed) Underlying APR **Short YU** Underlying APR Implied APR (fixed) 1. **Long YU positions: User pays a Fixed Rate (i.e. Implied APR) and receives the Underlying Rate** If your long position was opened at an Implied APR of 8% and the Underlying APR averages 10% at settlement, you gain the difference: 10% - 8% = 2%. This gain is scaled down to 8-hours. Your collateral will be updated and increase accordingly. 2. **Short YU positions: User pays the Underlying Rate and receives a Fixed Rate (i.e. Implied APR)** If your short position was opened at an Implied APR of 20% and the Underlying APR averages 25% at settlement, you bear the loss: 25% - 20% = 5%. This loss is scaled down to 8-hours. Your collateral will be updated and decrease accordingly. circle-info On Boros, settlements are conducted periodically, just like the underlying funding rates. During each settlement: * **Collateral increases** if the rate you receive is higher than what you paid. * **Collateral decreases** if the rate you receive is lower than what you paid. These adjustments repeat every settlement until the position reaches maturity. [PreviousChapter 3 - Opening and Closing a Positionchevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-3-opening-and-closing-a-position) [NextChapter 5 - Long Rateschevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-5-long-rates) Last updated 11 months ago --- # Chapter 6 - Short Rates | Boros A short position is the exact opposite of a long one. If you expect the yield of BTCUSDT-Binance to decrease, you would enter a short position on its YU. Similarly, you can profit from a short position in YU from: 1. Decline in Underlying APR 2. Decline in Implied APR [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-6-short-rates#decline-in-underlying-apr) Decline in Underlying APR ------------------------------------------------------------------------------------------------------------------------------------ ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fk58OQzjPywXaInI4whIh%252Fimage.png%3Falt%3Dmedia%26token%3De2288b5a-6601-408b-8fd3-70d8b6187672&width=768&dpr=3&quality=100&sign=d30641c7&sv=2) When you open a short position on Boros, you commit to paying the floating Underlying APR. In return, you receive a Fixed APR, determined by the average Implied APR at the time you enter the position. Essentially, you are betting that the Fixed APR that you have locked in will exceed the total Underlying APR you will end up paying. During each settlement, your yield payment will be based on the YU’s Underlying APR, or funding rate in this case. You profit when the total yield earned (Fixed APR) surpasses the total yield you have paid (Underlying APR). **For example:** Dylan enters a short position in 5 YU-BTCUSDT-Binance at 10% Implied APR. At maturity (or when the position is closed), if the average Implied APR upon entry > average Underlying APY, Dylan will profit. In other words, Dylan will have collected more yield than what he will have paid. _Total Profit = (Fixed Yield Collected - Underlying Yield Paid)_ [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-6-short-rates#decline-in-implied-apr) Decline in Implied APR ------------------------------------------------------------------------------------------------------------------------------ You can also profit by “buying high, selling low” with a short position, that is by closing off your YU position at a lower Implied APR. **For example:** Dylan enters a short position in 5 YU-BTCUSDT-Binance at 10% Implied APR. After 3 rounds of settlement, Implied APR of YU-BTCUSDT-Binance drops to 2% Implied APR. At this point, Dylan could opt to close his position before maturity at a lower “price”, which is beneficial for traders in a short position. _Total Profit = (Fixed Yield Collected - Underlying Yield Paid)+ Profit from YU Sale_ Instead of holding to maturity, this strategy employs a more active approach in market timing to exit your position when the Implied APR (market value of YU) is lower than your entry, allowing you to capture both: 1. Yield Profits 2. Capital Gain from YU Trading [PreviousChapter 5 - Long Rateschevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-5-long-rates) [NextChapter 7 - Margin and Liquidationschevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations) Last updated 7 months ago --- # Hedging Funding Rates Payment | Boros Assuming a positive funding rate environment, traders with a long position on perp exchanges will pay the funding rate at each interval (differs across exchanges). ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FaLMeJSwYV1s65t0lyxi2%252Fimage.png%3Falt%3Dmedia%26token%3Df2d4d8ac-36ff-4b60-8b19-894830f96744&width=768&dpr=3&quality=100&sign=25e3e57f&sv=2) In the example above, a long position on Binance’s BTCUSDT Perp market will pay 0.0069% or 7.55% APR. However funding rate payments can fluctuate significantly, which can be a significant cost for traders with large position sizes. Traders can hedge their floating payment exposure to funding rates by swapping it into a fixed payment on Boros. To achieve this, traders with a long position on the underlying perps exchange should open a long YU position on Boros on the same market. To illustrate how this works: Let’s use an example of a trader with a long position of 100 BTC on the Binance BTCUSDT market, effectively paying funding rates on 100 BTC while the position remains open. To hedge this funding rate position, the trader opens a long position of 100 YU-BTCUSDT(Binance) on Boros at an implied APR of 6%. This long YU position: * Pays a fixed rate at the implied APR of 6% * Receives the underlying APR (i.e. the funding rate of the underlying position) ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252F0N1umu9fVvZv2WTLNQqB%252Fimage.png%3Falt%3Dmedia%26token%3Ddfae71cf-c030-4b64-9924-de1e388830c1&width=768&dpr=3&quality=100&sign=848f47af&sv=2) Notice that the trader was initially paying the floating funding rate on Binance. After opening a 100 YU position on Boros, the trader now receives that same floating funding rate payment, while paying a fixed APR of 6%. This resulted in an aggregate position where the trader has locked in to paying a fixed APR of 6% (i.e. the implied APR when the position was opened) and has removed his exposure to the volatile fluctuations of the floating funding rate. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FSmpuFiIOHRnC3ocH3FZy%252Fimage.png%3Falt%3Dmedia%26token%3Df8c98505-0c10-4bb3-9fe4-584f234e0902&width=768&dpr=3&quality=100&sign=74d020d8&sv=2) circle-info **A trader looking to hedge their funding rate payment only needs to observe the current implied APR of the asset they are looking to hedge.** The trader can open a long YU position if the implied APR is favorable to fix their funding rate payments. A lower implied APR will result in a lower fixed APR payable, in other words, a better hedge for the trader. TLDR: To hedge the funding rates exposure of a long position on a perp exchange, you should open a long YU position on Boros of the same notional size. For example, if you have a 50 ETH long position on ETHUSDT(Hyperliquid), you can hedge the funding rate payments by opening a long position of 50 YU-ETHUSDT(Hyperliquid on Boros). [PreviousTLDR: How to Winchevron-left](https://pendle.gitbook.io/boros/the-basics/tldr-how-to-win) [NextFixed Funding Rates Receivableschevron-right](https://pendle.gitbook.io/boros/advanced-strategies/fixed-funding-rates-receivables) Last updated 11 months ago --- # Chapter 7 - Margin and Liquidations | Boros In order to open a position on Boros, you first need to deposit collateral. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fh3SroVKfG9UnoVLEnugs%252Fimage.png%3Falt%3Dmedia%26token%3Dcd7b640b-d762-43f2-a421-588dfc777dc7&width=768&dpr=3&quality=100&sign=e1d717aa&sv=2) [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations#margin) Margin ---------------------------------------------------------------------------------------------------------- After depositing collateral, you will be able to open positions on Boros. The app will show you key information for you to start your journey: 1. **Available Margin** The total amount of collateral available to be used. As you open more positions, this number declines as the collateral is used to back the open positions (i.e. margin is consumed upon opening a position). 2. **Margin Required** The amount of collateral that is needed to open this position. When you open a position, a certain amount of collateral will be “consumed” or “reserved”, reducing the total amount of collateral . This consumed collateral cannot be withdrawn or used to open other positions. 3. **Notional Size** The amount of underlying asset exposure in this position (i.e. How much YU are you longing or shorting). Example: 5 YU-BTCUSDT-Binance = 5 YU notional size, indicating a yield from 5 BTC position in the BTCUSDT market on Binance ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fiuyw4zId2AP7WBOSISHf%252Fimage.png%3Falt%3Dmedia%26token%3D2e35bb40-66bc-4122-a0d8-9ff5dd634a72&width=768&dpr=3&quality=100&sign=64b1f32&sv=2) [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations#leverage) Leverage -------------------------------------------------------------------------------------------------------------- Just like perpetual exchanges, Boros allows traders to open positions on leverage. In a market with 2x leverage for instance, a trader with a 10 ETH collateral will be able to open a position worth up to 20 ETH, doubling their buying power. In short, leverage allows traders to do more with the same amount of capital but watch out, a higher leverage also means a higher risk of liquidation. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FbIFKiPQrQhXkTKFqidfE%252Fimage.png%3Falt%3Dmedia%26token%3Dc6de381c-b43d-4fee-95d6-ccf3816a5983&width=768&dpr=3&quality=100&sign=a67e1415&sv=2) [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations#liquidation) Liquidation -------------------------------------------------------------------------------------------------------------------- Liquidation occurs when the value of your position falls below a specified threshold, leading to an automatic closure by the system to prevent further losses. There are 2 different ways for you to monitor your liquidations: 1. **Liquidation Implied APR** Similar to the "liquidation price" on perpetual exchanges, if YU’s implied APR reaches this rate, your position will be open for liquidation. Note that the liquidation implied APR can change since your collateral balance is affected by the periodic yield settlements from your currently open position. 2. **Health Factor** The health factor is a metric that measures the safety of a position on Boros, it helps users visualize the “health” of a user’s position from liquidations. Your position will be liquidated when health factor falls to 0. Maintaining a health factor above zero is crucial to avoid liquidation. triangle-exclamation Watch your position's health factor or liquidation implied APR to avoid getting liquidated. In short, your position’s overall health is sensitive to certain changes, including the “price” of YU (Implied APR) and the amount of collateral you have, which can fluctuate after every settlement (see [Chapter 4](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement) ). Regular monitoring and timely collateral adjustments are crucial to maintain position health (health factor) and avoid liquidation. You can learn more about Margin and Liquidations in detail from our docs [herearrow-up-right](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations) . * * * [PreviousChapter 6 - Short Rateschevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-6-short-rates) [NextTLDR: How to Winchevron-right](https://pendle.gitbook.io/boros/the-basics/tldr-how-to-win) Last updated 8 months ago --- # TLDR: How to Win | Boros [hashtag](https://pendle.gitbook.io/boros/the-basics/tldr-how-to-win#funding-rate-speculators) Funding rate speculators ---------------------------------------------------------------------------------------------------------------------------- 1. Deposit Collateral 2. Open a position 1. Long YU if you think: average funding rate > current implied APR 2. Short YU if you think: average funding rate < current implied APR 3. Watch your position's health factor and make sure you don’t get liquidated! [hashtag](https://pendle.gitbook.io/boros/the-basics/tldr-how-to-win#yu-traders) YU traders ------------------------------------------------------------------------------------------------ 1. Deposit Collateral 2. Open a position 1. If you think implied APR is going up (buy low sell high) → Long YU 2. If you think implied APR is going down (short a falling price) → Short YU 3. Watch your position's health factor and make sure you don’t get liquidated! [PreviousChapter 7 - Margin and Liquidationschevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations) [NextHedging Funding Rates Paymentchevron-right](https://pendle.gitbook.io/boros/advanced-strategies/hedging-funding-rates-payment) Last updated 8 months ago --- # Implied APR vs Futures Premium | Boros [hashtag](https://pendle.gitbook.io/boros/advanced-strategies/implied-apr-vs-futures-premium#crypto-futures-premium) Crypto Futures Premium ------------------------------------------------------------------------------------------------------------------------------------------------ A futures contract is an agreement to buy or sell an asset at a set price on a future date (i.e. a maturity date). Crypto futures contract tend to trade at a premium vs its spot value, and will eventually converge to its spot value at contract expiry. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fu0C14MTC8UJSFbazK2al%252Fimage.png%3Falt%3Dmedia%26token%3D75708ff1-af30-4cc6-8b07-8bd4c08bd2c1&width=768&dpr=3&quality=100&sign=adbeea1b&sv=2) To capture the futures premium, traders can execute a cash-and-carry trade (a.k.a Basis trade), where they hold a spot position while simultaneously shorting the futures contract of the same asset until the contract’s expiry. Using the above screenshot as an example, a trader can hold 1 BTC spot position while simultaneously shorting 1 BTC worth of the futures contract above, effectively earning the 8% APR premium of the contract while being delta neutral (i.e. unaffected by the change in price of BTC). Note that the 8% APR is fixed as long as the trader keeps this position open until contract maturity. [hashtag](https://pendle.gitbook.io/boros/advanced-strategies/implied-apr-vs-futures-premium#funding-rate-basis-trading) Funding Rate Basis Trading -------------------------------------------------------------------------------------------------------------------------------------------------------- Traders can carry out the same cash-and-carry trade strategy via Perpetual contracts as well. In this scenario, the trader will hold a spot BTC position while shorting a BTC perpetual contract of the same size, effectively earning the funding rate as long the position is open (assuming a positive funding rate). While Perpetual contracts have no maturity as opposed to Futures contracts, this strategy has no guarantee on yield as funding rates can fluctuate significantly. However as covered in the previous [chapter](https://pendle.gitbook.io/boros/advanced-strategies/fixed-funding-rates-receivables) , traders can fix their funding rates receivables by shorting YU of the same notional size on Boros. In this scenario, traders executing a cash-and-carry trade strategy on perpetual funding rates can fix their yield on Boros, effectively converting their floating rate exposure into a fixed exposure at the implied APR upon opening their position. [hashtag](https://pendle.gitbook.io/boros/advanced-strategies/implied-apr-vs-futures-premium#implied-apr-vs-futures-premium) Implied APR vs Futures Premium ---------------------------------------------------------------------------------------------------------------------------------------------------------------- Now lets compare the 2 different strategies listed above: 1. Cash-and-carry trade via Futures This is enabled by holding a spot asset while shorting the futures contract simultaneously, **earning a fixed yield from the quarterly futures premium** until the contract expiry. 2. Cash-and-carry trade via Perpetuals and Boros This is enabled by holding a spot asset while shorting the perpetuals contract simultaneously, earning yield from funding rates. The trader can then open a short position on Boros to **earn a fixed yield at the implied APR** upon opening the position until maturity. Notice that the above strategies have extremely similar behaviors and in fact, crypto futures premium movement have historically been rather correlated to funding rates. With Boros, traders can now execute cash-and-carry trade strategies on either perpetuals or futures to achieve a delta neutral exposure while earning fixed yields. Barring contract risks, both of these strategies have similar market exposure + fixed yields. With that, perhaps futures premium might be a good indicator of implied APR of the same asset? 🤔 circle-check Futures premium might be a good indicator of implied APR as traders can execute a cash-and-carry trade strategy of similar risk profile with the same fixed yield outcome. If there is a disparity between the implied APR on Boros vs Futures Premium of a given asset, cash-and-carry traders will likely execute the strategy with the more favorable APR and unwind the less favorable one. [PreviousFixed Funding Rates Receivableschevron-left](https://pendle.gitbook.io/boros/advanced-strategies/fixed-funding-rates-receivables) Last updated 8 months ago --- # Fixed Funding Rates Receivables | Boros Assuming a positive funding rate environment, traders with a SHORT position on perp exchanges will receive a funding rate payment at every interval (which can differ across exchanges). ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FNhUwrbg7lYQBHkgIeyTo%252Fimage.png%3Falt%3Dmedia%26token%3Dd51d2fff-8196-489a-a9ae-b3cbbba97166&width=768&dpr=3&quality=100&sign=a36df0f1&sv=2) In the example above, a short position on Binance’s BTCUSDT Perp market will receive 0.0062% or 6.789% APR every 8 hours. However funding rate payments can fluctuate significantly, which can be hedged to receive a fixed APR on Boros. This is especially useful for entities with large exposure on funding rate APRs, e.g. funding rate basis traders like Ethena. Traders can hedge their floating funding rate receivables by swapping it into a fixed APR on Boros. To achieve this, traders with a short position on the underlying perps exchange should open a short YU position on Boros on the same market. To illustrate how this works: Let’s use an example of Bob with a short position on the Binance BTCUSDT market of 50 BTC, which is effectively receiving funding rates from 50 BTC as long as the position remains open. To hedge the funding rate receivables, **Bob opens a short position of 50 YU-BTCUSDT(Binance) on Boros at an implied APR of 5%**. Note that a short YU position: * Receives a fixed rate of 5%. (The implied APR when opening the position) * Pays the underlying APR (i.e. the funding rate of the underlying position) ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FAJDjHcCuhI5s1NYxjXcI%252Fimage.png%3Falt%3Dmedia%26token%3Da53d25db-9869-4e8b-b768-b3b8f46cb01d&width=768&dpr=3&quality=100&sign=d6fd5011&sv=2) Notice that Bob was initially exposed to a floating funding rate yield receivables from Binance. After opening a 50 YU position on Boros, Bob pays the same floating funding rate in exchange for a fixed APR receivable. This effectively results in an aggregate position where Bob is receiving a fixed APR of 5% (i.e. the implied APR when the position was opened). ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FIzPhs1JFDzWoBQ69Xs83%252Fimage.png%3Falt%3Dmedia%26token%3Dbc81078e-e258-4d92-94c9-348643fe25c8&width=768&dpr=3&quality=100&sign=84b7d505&sv=2) circle-info **A trader looking to hedge their funding rate receivables only needs to observe the current implied APR of the asset they are looking to hedge.** The trader can open a short YU position if the implied APR is favorable to fix their funding rate yields. A higher implied APR will result in a higher fixed APR receivables, in other words, a better fixed income for the trader. TLDR: To hedge the funding rates receivables of a short position on a perp exchange, you should open a short YU position on Boros of the same notional size. For example, if you have a 20 ETH short position on ETHUSDT(Hyperliquid), you can hedge the funding rate receivables by opening a short position of 20 YU-ETHUSDT(Hyperliquid) on Boros. [PreviousHedging Funding Rates Paymentchevron-left](https://pendle.gitbook.io/boros/advanced-strategies/hedging-funding-rates-payment) [NextImplied APR vs Futures Premiumchevron-right](https://pendle.gitbook.io/boros/advanced-strategies/implied-apr-vs-futures-premium) Last updated 11 months ago --- # Margin and Liquidations | Boros Docs | Boros [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#cross-margin) Cross Margin ---------------------------------------------------------------------------------------------------------------------------- Boros allows for cross-margin with the same assets, allowing users to leverage the same collateral across multiple positions within the same collateral zone (e.g. Same BTC collateral utilized across all markets within the BTC zone). Additionally, Boros also offers isolated pools, where collateral is only confined to specific markets. The Collateral and Notional size will always be denoted in the same asset. For example, in the BTCUSDT-Binance market on Boros, each YU-BTCUSDT-Binance represents yield from funding rates of 1 BTC and the collateral required to back the position is in BTC. Liquidations within a collateral zone will not affect positions in other zones or isolated pools. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FlxvQ7vpS7oJEhIWWTvze%252Fimage.png%3Falt%3Dmedia%26token%3D1570d9a5-bf08-43d2-8aad-c7297eebea38&width=768&dpr=3&quality=100&sign=e9f7d6b5&sv=2) [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#leverage) Leverage -------------------------------------------------------------------------------------------------------------------- Leverage is the ratio of the position value against the required collateral backing it. For example: A trader is looking to open a 10,000 YU-ETHUSDT, at current prices that position has a value of 20 ETH. If the market has a 2x leverage, the minimum amount of collateral the trader has to place will be 10 ETH. In other words, with 10 ETH collateral, the trader will be able to open a position of 20ETH. [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#initial-margin) **Initial Margin** ------------------------------------------------------------------------------------------------------------------------------------ Leverage can be set between 1 and the max leverage, which may vary by asset. The initial margin required to open a position is: Copy Initial Margin = (NotionalSize * YearsToMaturity * ImpliedAPR) / Leverage The initial margin is consumed by the position and CANNOT be withdrawn or used for cross margin positions. The remaining margin in your collateral that is not consumed by the position is the “Available Margin”. Example 1: If you have $2000 in collateral and proceeds to open a $6000 position in a 3x leverage market, the margin consumed is $2000 (i.e. fully consumed). The available margin is zero and the same collateral cannot be reused to open a new position. Example 2: If you have $10000 in collateral and proceeds to open a $8000 position in a 2x leverage market, the margin consumed is $4000 (i.e. $4000 collateral is used to back an $8000 position in a 2x lev market) and the available margin remaining is $6000. Unrealized profits from open positions are automatically added to the initial margin available for new positions, reflected by an increase in the "Available Margin" within the dApp. Conversely, unrealized losses will result in a decrease in "Available Margin.” [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#maintenance-margin-and-liquidations) **Maintenance Margin and Liquidations** ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Positions can be liquidated when the position’s **Net Balance** falls below the maintenance margin requirement (i.e. Your total net worth in the position based on the current mark implied APR is less than the required maintenance margin). ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#net-balance) Net Balance A position’s Net Balance comprises of: Copy Net Balance = Collateral + Unrealized PnL #### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#collateral) Collateral Collateral value changes after every rate settlement where Boros settles every position’s fixed APR against the underlying APR. Learn more about interest rate accounting and settlement [here](https://pendle.gitbook.io/boros/boros-docs/interest-rate-accounting/interest-rate-accounting-and-settlement) . Note that the value of your collateral is only affected after every rate settlement, where a portion of the position is realized. The change in collateral is only affected by the difference between fixed vs underlying APR. For example: A short positions can be liquidated if the underlying rate maintains above its fixed rate in extended periods. This is because at every settlement period, the position pays a higher underlying rate vs the fixed rate it receives, reducing its collateral. A prolonged exposure in this situation might reduce the collateral to the point where the Net Balance falls below the maintenance margin, triggering a liquidation. #### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#unrealized-pnl) Unrealized PnL Unrealized PnL value is entirely dependent on the current **mark implied APR** of the asset (learn more about implied APR [here](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/interest-rate-trading-yu-trading#implied-apr-and-fixed-apr) ). In essence, unrealized PnL is affected by changes in YU value, which is derived from the mark implied APR. For example: A long position will have a negative Unrealized PnL when mark implied APR falls. The position can be liquidated if the mark implied APR falls to the point where the Net Balance falls below the maintenance margin. Underlying Rate ⬆️ Underlying Rate ⬇️ Mark Implied APR ⬆️ Mark Implied APR ⬇️ Long Rates (pay fixed, receive underlying) Net Balance ⬆️ Net Balance ⬇️ Net Balance ⬆️ Net Balance ⬇️ Short Rates (pay underlying, receive fixed) Net Balance ⬇️ Net Balance ⬆️ Net Balance ⬇️ Net Balance ⬆️ triangle-exclamation Always monitor your Net Balance and Margin Ratio. Top up your collateral to increase your Net Balance when Margin Ratio gets dangerously low to avoid liquidations. #### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#mark-implied-apr) Mark Implied APR The mark implied APR is a simple time-weighted average (TWAP) of the last traded implied APR on the order book. It serves as the reference rate for Boros’ margin system—meaning your position value and unrealized PnL is calculated based on the mark implied APR, not the last traded price. This helps prevent unnecessary liquidations caused by short-term price spikes or potential manipulation. ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#maintenance-margin) Maintenance Margin The maintenance margin is set at 66% of the initial margin at max leverage upon opening a position. Positions can be liquidated when the their Net Balance falls below this maintenance margin. Copy Maintenance Margin = Initial Margin * 66% The maintenance margin on Boros declines linearly to the margin floor until maturity as the position approaches maturity, assuming all other factors remain constant. This is because: 1. As time passes, part of the position is settled at each settlement interval (e.g. In a long-rates position, part of the position is settled when the position pays a fixed yield in exchange for the underlying yield during settlement). 2. As yields are settled, the effective position value declines overtime, hence maintenance margin required to maintain that position declines too. 3. At maturity, the entire position is settled (realized). Total position value is zero and maintenance margin is also zero. The realized position is reflected in the collateral. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FAXpvW1souZE1ZekF1OcA%252Fimage.png%3Falt%3Dmedia%26token%3D223afe13-0b3f-4559-b2ae-36fad6d44cc0&width=768&dpr=3&quality=100&sign=b4384f8c&sv=2) ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#margin-floor) Margin Floor The margin floor on Boros is the minimal Initial Margin necessary to open a position when the market is in a state where it is subject to high implied APR volatility. This threshold prevents the required margin from falling below a certain level, ensuring that all positions will be adequately backed by sufficient collateral under all circumstances, safeguarding the platform against bad debts. There are 2 types of Margin Floors on Boros. #### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#id-1.-margin-floor-near-maturity) **1\. Margin Floor Near Maturity** ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F3989690969-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252F0XAIPQzisn7bLWYgKNdt%252Fuploads%252FnmstM1JUdmgQXH39pV4b%252Fimage.png%3Falt%3Dmedia%26token%3Df913e0fb-9078-468e-a194-62ee4339952a&width=768&dpr=3&quality=100&sign=7e39c859&sv=2) As a position approaches maturity, its required margin decreases. This reduction is due to the periodic settlement of yields, which lowers the effective value of the position and consequently the required margin as the maturity date nears. Without a Margin Floor, a position that is close to maturity will only be backed by a minimal amount of collateral. Given that funding rates can experience sharp fluctuations over short periods, significant rate changes could force positions to close at an implied APR below the Maintenance Margin, potentially leading to bad debts. For example, a market with a <1 Week to Maturity> Margin Floor would mean that the margin CANNOT decay below the threshold as maturity approaches. Positions initiated during <1 week to maturity must provide a margin _equivalent_ to an order placed with 7 days remaining until maturity. The Maintenance Margin for such positions will also be derived from the Margin Floor. The Margin Floor acts as a critical buffer that ensures that there will be sufficient collateral to withstand extreme market movements throughout maturity, protecting the platform against bad debts. #### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#id-2.-margin-floor-for-low-implied-apr) **2\. Margin Floor for Low Implied APR** On Boros, the required margin for opening or maintaining a position is proportional to the Implied APR. A lower Implied APR means a lower required margin. Users have the flexibility to place limit orders at any Implied APR, including negative values or even at 0%, which can occur in funding rates. Since Initial Margin is linearly correlated to Implied APR, an order set at 0% APR would theoretically require zero collateral. In the absence of a Margin Floor, this could allow users to place an unlimited number of YU orders at 0% APR without any collateral. Any losses from such scenarios would thus lead to bad debts for the platform. To mitigate this risk, the Margin Floor establishes a minimum Implied APR that must be considered when calculating the required margin for a position. For example, in a market with 8% Implied APR Margin Floor, any orders placed between the range of _\-8% to 8%_ must provide a margin _equivalent_ to an order at 8% Implied APR. Additionally, the Margin Floor also acts as a buffer that ensures there will be sufficient collateral to handle any Implied APR fluctuations throughout maturity, thereby safeguarding the platform against bad debts. Each market will only have ONE Margin Floor value, determined by the higher of the two aforementioned types: or . ### [hashtag](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations#auto-deleveraging) **Auto deleveraging** Boros has an option to trigger auto-deleveraging, a critical feature designed as a vital safeguard to protect against significant bad debt risks. The purpose of auto-deleveraging is strictly to ensure the platform stays solvent. If triggered, the users on the opposite side of the position at risk (ranked by unrealized P&L and leverage used) will be forced to close their positions (i.e. take profit). These positions are closed at the current implied APR against the liquidated user, ensuring that the platform does not accrue bad debt. Audo-deleveraging is an important final safeguard, with the goal of ensuring that under all circumstances, the protocol and users can continue to operate with ease of mind. You can refer to a more in-depth calculation and other preventive mechanisms on Boros over at the [next page](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/detailed-calculations-on-margin-and-liquidations) . [PreviousFeeschevron-left](https://pendle.gitbook.io/boros/boros-docs/interest-rate-trading/fees) [NextDetailed Calculations on Margin and Liquidationschevron-right](https://pendle.gitbook.io/boros/boros-docs/risk-parameters/margin-and-liquidations/detailed-calculations-on-margin-and-liquidations) Last updated 3 months ago --- # Chapter 3 - Opening and Closing a Position | Boros [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-3-opening-and-closing-a-position#opening-a-position) Opening a Position ----------------------------------------------------------------------------------------------------------------------------------------- On Boros, traders can open either a Long or Short position on YU. Prior to opening a position, a trader is required to have enough balance in their collateral to back the desired position size. You can learn more about collateral in [Chapter 7](https://pendle.gitbook.io/boros/the-basics/chapter-7-margin-and-liquidations) . ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-3-opening-and-closing-a-position#long-yu) Long YU ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FlIEfY02SHhUXeTcsIoM1%252Fimage.png%3Falt%3Dmedia%26token%3D906fd7a4-a2fe-4869-a198-fe223d8c93fd&width=768&dpr=3&quality=100&sign=95fa9e5f&sv=2) If BTC is trading at $50,000 and you are bullish BTC, you will enter a long position on BTC. This is done by paying the current price to acquire BTC in the hopes of selling BTC for >$50,000 later. Similarly on Boros, if you expect the funding rate to increase, you should enter a long position on YU. This is achieved by paying the current “price” or “Implied APR” of YU in exchange for the Underlying APR. Essentially, you commit to paying a fixed rate in the hopes of receiving a higher rate. Traders with a long YU position benefit when the Underlying APR increases relative to the Implied APR upon entry. circle-info **Long YU** * Commits to paying a Fixed APR (i.e. Implied APR upon opening the position) to receive the Underlying APR. * Expects Underlying APR > Implied APR ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-3-opening-and-closing-a-position#short-yu) Short YU ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252F6eJf0f2V5LdmgVHDtsAC%252Fimage.png%3Falt%3Dmedia%26token%3De8768311-fcce-430b-8d60-e01d0afb4aef&width=768&dpr=3&quality=100&sign=c63f71ae&sv=2) A short YU position is the opposite of a long YU position. If you expect a decline in the funding rate, you should enter a short position instead. Traders in a short position pay the Underlying APR in exchange for receiving a Fixed Rate (i.e. the Implied APR upon entry). These traders benefit when the Underlying APR decline relative to the Implied APR. In simple terms, when you short YU, you are betting that the Fixed Rate you lock in will end up being higher than the Underlying APR you will be paying. circle-info **Short YU** * Commits to paying the Underlying APR to receive a Fixed APR (i.e. Implied APR upon opening the position). * Expects Implied APR > Underlying APR To close an open position, Boros automatically opens an opposite position of the same size. [PreviousChapter 2 - Implied APR and Underlying APRchevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr) [NextChapter 4 - Settlementchevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement) Last updated 11 months ago --- # Chapter 0 - Understanding Funding Rates | Boros [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#what-are-funding-rates) What are funding rates? ----------------------------------------------------------------------------------------------------------------------------------------------- Funding rate is an essential part of perpetual markets such as Binance Futures and Hyperliquid. They act as a mechanism to ensure that the price of a perpetual contract stays anchored to the actual market price (i.e. price on the spot market). Funding rates achieve this balance by establishing periodic payments made between traders with long and short positions: * If the price of the perpetual contract BTCUSDT is higher than the BTC spot price, traders holding long positions will pay funding to those in short positions. This payment discourages long holders and incentivizes short positions, helping to bring the contract price closer to the spot price. * Conversely, if the perpetual contract BTCUSDT trades below the BTC spot price, short position holders pay funding to long holders, encouraging more traders to go long, thus raising the perpetual's price to the spot level. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FIfWybWBlgtC8AKcbRUvW%252Fimage.png%3Falt%3Dmedia%26token%3Dbaa8b2f2-b54d-43b1-a13f-b0d6f3d399bd&width=768&dpr=3&quality=100&sign=4b7de372&sv=2) circle-info Traders either pay _or_ get paid to keep their perpetual contracts open. This periodic payment is called funding rate. * When funding rate is positive, traders with long positions pay traders with short positions * When funding rate is negative, traders with short positions pay traders with long positions [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#how-do-funding-rates-work) How Do Funding Rates Work? ----------------------------------------------------------------------------------------------------------------------------------------------------- Funding rates are settled at regular intervals, which can differ across exchanges (8h intervals for Binance, 1h interval for Hyperliquid, etc). During settlement, long or short positions are either charged or paid the funding rates. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252F3OYhmVV0tD5KJTRIiox9%252Fimage.png%3Falt%3Dmedia%26token%3Dd5fc6cb7-51e9-4192-beb7-ec6e902aa1c2&width=768&dpr=3&quality=100&sign=e232bbb9&sv=2) _Source:_ [_Hyperliquid_arrow-up-right](https://app.hyperliquid.xyz/trade/BTC) On exchanges, funding rates are usually presented in scaled down figures (based on their settlement interval). On Hyperliquid, funding rates are settled _**every hour**_, so a 0.0013% rate (positive funding) in the example above would mean that: * A trader with a $100,000 long position in BTCUSD on Hyperliquid will have to pay _$100,000 x 0.0013% = $1.30_ every hour (assuming funding rate remains). * A trader with a $100,000 short position in BTCUSD on Hyperliquid will earn $1.30 every hour (assuming funding rate remains). ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FY3Zw2jsvON0YfEHK8Zak%252Fimage.png%3Falt%3Dmedia%26token%3D559f5df2-f3af-4a2f-89e8-2b41f81c4c89&width=768&dpr=3&quality=100&sign=26729853&sv=2) _Source:_ [_CoinGlass_arrow-up-right](https://www.coinglass.com/funding/BTC) The example above is an illustration of how funding rates can vary greatly between exchanges. The rates can exhibit significant volatility, often exceeding the volatility of the underlying asset’s price. For example, the funding rate for BTCUSDT on Binance shown above dropped dramatically from 0.0032% to -0.0041% within 48 hours, a 228% change if annualized. These volatile swings are relatively common in the realm funding rates, even for blue chip assets like BTC. Boros allows traders to speculate on the direction of funding rates, potentially profiting from changes in these rates. [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#how-to-use-funding-rates) How to Use Funding Rates -------------------------------------------------------------------------------------------------------------------------------------------------- Here are some examples of how funding rates can be utilized to enhance your trading strategies. ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#gauging-market-sentiment) Gauging Market Sentiment ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252FxzjSMTbuBUCbFpJnh0wh%252Fimage.png%3Falt%3Dmedia%26token%3Da0c0ac6d-1c74-4456-80ab-f78e46922578&width=768&dpr=3&quality=100&sign=4244a543&sv=2) _Source:_ [_CoinGlass_arrow-up-right](https://www.coinglass.com/FundingRateHeatMap) Many traders rely on funding rates as an indicator of market sentiment. For example, a positive funding rate in ETHUSDT tells us that there are more traders in long positions, and that the market is bullish. However, an _overly_ positive funding _**may**_ point to ETH being overbought. Funding rates are a reflection of collective market behavior. Leveraging this information might help you frame your market outlook. On Boros, you can proactively use this understanding to your advantage. Bullish ETH outlook? Go long on the ETH funding rate. Think SOL is overbought? Short the SOL funding rate. Given the volatility historically seen in funding rates, the potential for profits (or losses) is also present. ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#delta-neutral-strategy-cash-and-carry-trade) Delta Neutral Strategy (Cash and Carry Trade) Funding rates can be a great source of yield, especially for traders who employ delta-neutral strategies, allowing them to double up on their yield streams. As an example of how a simple delta-neutral strategy might work: 1. Stake 100 ETH on Lido to earn ~4% APR 2. Short 100 ETH on Binance This strategy makes the portfolio delta-neutral, meaning it is insulated from fluctuations in ETH's price. If ETH price goes down, the short position on Binance will yield profits that offset any devaluation of the staked ETH on Lido. If ETH price rises, the ETH on Lido will become more valuable, cancelling out any losses from the short position on Binance. No matter which way ETH price goes, you will be up in “yield” from Lido, minus any fees (if any) to maintain the short position. If funding rate is positive, you will actually get paid to maintain the short position, thus earning double yield from Lido _**and**_ funding rate fees. What you see here is essentially what the Ethena protocol does - delta neutral farming with ETH. The double yield stream allows Ethena to offer outsized stablecoin yield for sUSDe (when funding rate is positive for ETH). However, this yield is exposed to the volatility of funding rates, with no way of locking in higher APRs during high funding rate environments. Boros solves that. On Boros, users are able to supplement their existing delta-neutral strategies by turning the variable fees from funding rates into a _**fixed**_ yield stream. This capability allows traders and protocols like Ethena to secure stable yields from delta-neutral farming, making their income streams more predictable and easier to manage, or even locking in higher rates. You can learn more about advanced strategies for Boros [here](https://pendle.gitbook.io/boros/advanced-strategies/hedging-funding-rates-payment) . [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#additional-resources) Additional Resources ------------------------------------------------------------------------------------------------------------------------------------------ BitMex published a comprehensive report on funding rate as of Q3 2025, check it out here: [https://blog.bitmex.com/2025q3-derivatives-report/arrow-up-right](https://blog.bitmex.com/2025q3-derivatives-report/) [PreviousWelcomechevron-left](https://pendle.gitbook.io/boros) [NextChapter 1 - Yield Units (YU)chevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu) Last updated 25 days ago * [What are funding rates?](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#what-are-funding-rates) * [How Do Funding Rates Work?](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#how-do-funding-rates-work) * [How to Use Funding Rates](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#how-to-use-funding-rates) * [Gauging Market Sentiment](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#gauging-market-sentiment) * [Delta Neutral Strategy (Cash and Carry Trade)](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#delta-neutral-strategy-cash-and-carry-trade) * [Additional Resources](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates#additional-resources) --- # Chapter 1 - Yield Units (YU) | Boros circle-check For those familiar with Pendle V2, YU (Yield Units) on Boros is akin to YT (Yield Tokens) on Pendle V2. [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#understanding-yu) Understanding YU --------------------------------------------------------------------------------------------------------------------- Boros enables yield trading by creating something called a Yield Unit (YU). YU represents the future yield of an underlying asset until its maturity. Simply put, when you own a YU, you own the rights to the yield that asset generates over a specific period. For example: * 5 YU-ETHUSDT-Binance represents yield from funding rates on a 5 ETH position on Binance ETHUSDT. * 69 YU-BTCUSDT-Hyperliquid represents yield from funding rates on a 69 BTC position on Hyperliquid. circle-info Yield Units (or YU) is the core of all actions in Boros. Yield trading on Boros is enabled by entering either a long position or a short position on YU. The goal is to capture differences in expected yield over time. ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#implied-apr) Implied APR YU’s price is denoted in “Implied APR”. You can think of this as the cost to purchase YU. Upon entering a position, the average Implied APR of your entry forms the basis for fixed rate payments. Another way to look at Implied APR is the market’s expected average funding rate payments from now until maturity. You can learn more about Implied APR in [Chapter 2](https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr) . ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#yu-maturity) YU Maturity Every YU has a maturity date. At maturity, YU no longer receives any yield, and all payment obligations will have been settled. Example: In the ETHUSDT-Binance market with a maturity date of December 25, 2026, a trader who buys 5 long YU position will: 1. Receive yield from ETHUSDT Binance equivalent to a 5 ETH position from now until 25-Dec-2026 2. Pay a fixed yield (which is the implied APR at the point of entry) from now until 25-Dec-2026 ### [hashtag](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#yu-value-yu-price) YU Value / YU Price Remember - YU essentially represents the future yield of an asset. As such, the fair value of YU is the sum of total yield you will receive until maturity. ![](https://pendle.gitbook.io/boros/~gitbook/image?url=https%3A%2F%2F1039850908-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252Fuicb86uGosg6F3k52Cde%252Fuploads%252Fm491rsWLCatvvJG6yKvG%252Fimage.png%3Falt%3Dmedia%26token%3Dc3019a09-9e14-4444-bf86-80ea29acc0ff&width=768&dpr=3&quality=100&sign=c78d0985&sv=2) A trader with a long position in YU-ETHUSDT-Binance for instance will receive yield after every settlement. As such, the value of YU will also decrease after every settlement, since there will be less future yield to account for, assuming Implied APR stays the same. You can learn more about settlement in [Chapter 4](https://pendle.gitbook.io/boros/the-basics/chapter-4-settlement) . At maturity, the entire position will have been settled, as there are no more yield obligations. At that point, the value of YU will be zero. * * * Additional notes: Note that all yields on Boros are denoted in APR terms (i.e. yields are annualized with simple interest calculations, not compound interest) to align with the market standard. Users familiar with Pendle V2 can think of YU as the YT, where users “pay” the implied yield in exchange for the underlying yield. Yield Units (YU) is used on Boros to represent the funding rate from 1 unit of the collateral asset in the underlying perpetuals exchange (e.g. Hyperliquid, Binance, Deribit, etc). [PreviousChapter 0 - Understanding Funding Rateschevron-left](https://pendle.gitbook.io/boros/the-basics/chapter-0-understanding-funding-rates) [NextChapter 2 - Implied APR and Underlying APRchevron-right](https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr) Last updated 25 days ago * [Understanding YU](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#understanding-yu) * [Implied APR](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#implied-apr) * [YU Maturity](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#yu-maturity) * [YU Value / YU Price](https://pendle.gitbook.io/boros/the-basics/chapter-1-yield-units-yu#yu-value-yu-price) --- # Start Here | Pendle Academy This doc is your full guide to yield-trading on Pendle. To learn more about the Pendle protocol and its mechanics, refer to [https://docs.pendle.finance/introductionarrow-up-right](https://docs.pendle.finance/introduction) . [](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield) ![Cover](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FoslfBEYad8kWvoFT2lLt%252F101.png%3Falt%3Dmedia%26token%3D5636c098-450a-4dcf-ba63-8ab0ba7a5ef9&width=490&dpr=3&quality=100&sign=bce5f0a4&sv=2) **Beginner** The basics of Pendle with easy to follow examples. [](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) ![Cover](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F2uJGokx8zCZ5eZVmSLfr%252FOptimise%2520Yield.png%3Falt%3Dmedia%26token%3Dff1201f9-0808-46e4-8612-2fca87d6a0e8&width=490&dpr=3&quality=100&sign=64253f93&sv=2) **Intermediate** Learn the various features available on Pendle. [](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) ![Cover](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F7N0K0hCkpArER6XxSZaH%252FDeep%2520Dive.png%3Falt%3Dmedia%26token%3Dfbb5768b-7309-46bc-a530-5bd3f71420f5&width=490&dpr=3&quality=100&sign=435ab2bb&sv=2) **Advanced** Dive deeper into yield trading and its intricacies to maximize your yield. [NextChapter 1 - Introduction to Optimizing Yieldchevron-right](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield) Last updated 1 year ago sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 1 - Introduction to Optimizing Yield | Pendle Academy > Course level: **#beginner** ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#manage-your-yields) Manage Your Yields In DeFi, you can place your assets into a yield farming pool to receive an APY that fluctuates over time, just like token prices. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FSojUvwgwHGxCvYkucImH%252Fimage.png%3Falt%3Dmedia%26token%3Dbbec362b-2e6e-4d2c-8f70-d59e67806c1c&width=768&dpr=3&quality=100&sign=a4a9a2f1&sv=2) Yield fluctuates **APR often goes down… 😢** You rushed into a new pool with 100% APR and only to find out yields have declined to 10% the day after. Sound familiar? circle-info 💡 What if you can “fix” this yield? **If only I had more capital when APR goes up… 🤑** In a bull market, APR goes up and many of us find ourselves thinking “man, if only increase my capital”. While you can always leverage your assets by borrowing, managing collateral and avoiding liquidation can be a daunting affair. circle-info 💡 What if you can increase your yield exposure without liquidation risk? * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#yield-bearing-tokens) Yield-bearing tokens circle-info 💡 _Yield-bearing Token_ is an umbrella term that refers to any token that generates yield. Examples: * Lido’s stETH and wstETH * Liquid restaking assets like EtherFi’s weETH, Renzo’s ezETH or KelpDAO’s rsETH * Staked stablecoin like Ethena’s sUSDe * LP Tokens (Balancer LP tokens, Uniswap LP tokens, Curve LP tokens, Aura pool tokens, etc) * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#introducing-pendle) Introducing Pendle Simply put, Pendle lets you earn better yields to help you secure better certainty, better returns (i.e. higher APY 🔥) _Y_ou are going to master these DeFi magics in our Academy. There are 2 main parts to fully understand Pendle. 1. **Yield-Tokenization** In the next chapter, we will explain how Pendle wraps and split yield-bearing tokens into its principal and yield components, **PT** (principal token) and **YT** (yield token) respectively. This opens you up to various ways to optimize yields. 2. **Yield-Trading** **PT** and **YT** can be traded via Pendle’s AMM. By creating a yield trading market in DeFi, Pendle unlocks the full potential of yield, enabling users to execute advanced yield strategies. We will go through how to [earn passive earning](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) as well as [active trading strategies](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) with Pendle in the next chapters. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#what-can-you-do-to-earn-better-yields-with-pendle) What can you do to earn better yields with Pendle * [Passive earning](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) * Fixed yield (e.g. earn fixed yield on stETH) * Earn extra yield **without additional risks, using the same asset** that you already own (e.g. provide liquidity with your stETH) * [Yield trading](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) * Long yield (e.g. bet on stETH yield going up by purchasing more yield) * Or, a mix of any of the all passive and active strategies, you are going to learn more on how to execute these strategies, including some advanced ones, in this Academy. [PreviousStart Herechevron-left](https://pendle.gitbook.io/pendle-academy) [NextChapter 2 - Yield Tokenization Basicschevron-right](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) Last updated 1 year ago * [Manage Your Yields](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#manage-your-yields) * [Yield-bearing tokens](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#yield-bearing-tokens) * [Introducing Pendle](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#introducing-pendle) * [What can you do to earn better yields with Pendle](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield#what-can-you-do-to-earn-better-yields-with-pendle) sun-brightdesktopmoon sun-brightdesktopmoon --- # Pendle 101 - Key Takeaways | Pendle Academy > Course level: **#beginner** [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#id-1.-introduction-to-optimizing-yields-with-pendle) 1\. **Introduction to optimizing yields with Pendle** ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ * Yield-bearing tokens are tokens that generate yield from various DeFi protocols. * Pendle is a platform that enables users to get better yields, through: * Yield Tokenization * Yield Trading * A few examples of what you can do on Pendle to get better yields include: 1. Earn fixed yield 2. Earn extra yield without additional risks, using the same asset that you already own (liquidity provision) 3. Increase yield exposure by purchasing more yield 4. and more~ [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#id-2.-yield-tokenization-basics) 2\. **Yield Tokenization basics** -------------------------------------------------------------------------------------------------------------------------------------------------------------- ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#yield-tokenization) Yield Tokenization * It means splitting a yield-bearing asset into two parts: the **principal** and the **yield**. * **Principal** + **Yield** = **Yield-bearing asset** * Pendle is a marketplace where yield-bearing assets can be tokenized into separate principal and yield tokens and are traded separately. ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#pt-and-yt) PT & YT Pendle splits a yield-bearing token into two parts: **Principal Token (PT)** and **Yield Token (YT)**. #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#principal-token-pt) **Principal Token (PT)** * **PT lets you redeem the underlying principal asset after the maturity date.** * PT has a **lower entry cost** than the original asset. PT value grows over time and becomes 1:1 redeemable with the original asset at maturity. * You [earn a fixed yield by buying and holding PT](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) . The difference between the entry cost and the redemption value is your fixed yield. * PT is similar to [zero-coupon bondarrow-up-right](https://www.investopedia.com/terms/z/zero-couponbond.asp) in traditional finance. #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#yield-token-yt) Yield **Token (YT)** * **YT lets you receive the yield of the underlying asset until its maturity date, claimable in real-time.** * You can buy only the yield, or more yield, by buying YT, at a much lower price than the principal. You profit if the yield you receive is more than what you paid for the YT. * You get [leveraged yield exposure](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) by buying YT, without liquidation or oracle risk. * YT is similar to [detached coupons of bondsarrow-up-right](https://www.investopedia.com/terms/c/coupon.asp) in traditional finance. triangle-exclamation **You can sell PT and YT anytime** on the Pendle market prior to maturity, with _**no**_ **lock or penalty**, at market price. They are tradable 24/7. Perhaps the most important takeaway from Pendle 101: circle-check 💡 **PT Price + YT Price = Accounting Asset Price** For example: **1 PT-sUSDe (USDe) + 1 YT-sUSDe (USDe) = 1 USDe** [PreviousChapter 2 - Yield Tokenization Basicschevron-left](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) [NextChapter 3.1 - Fixed Yield on Pendlechevron-right](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) Last updated 10 months ago * [1\. Introduction to optimizing yields with Pendle](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#id-1.-introduction-to-optimizing-yields-with-pendle) * [2\. Yield Tokenization basics](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#id-2.-yield-tokenization-basics) * [Yield Tokenization](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#yield-tokenization) * [PT & YT](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways#pt-and-yt) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 2 - Yield Tokenization Basics | Pendle Academy > Course level: **#beginner** [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#tl-dr) TL;DR ------------------------------------------------------------------------------------------------------------------- Yield tokenization means splitting a yield-bearing asset into its two components: the **principal** and the **yield** components. A yield-bearing asset is an asset that generates yield over time (e.g. stETH, Uniswap LP Token, sDAI, etc). To better illustrate this, we can look at the example of a **real estate property.** A real estate property is a yield-bearing asset, where it generates rental yield to the owner of the property. Now imagine a real estate property that’s been split into 2 components: * The rights to the ownership of the property. You can think of this as the **Principal**. * The rights to the rental income of the property, which can grant its owner the right collect all the rental income (AKA yield) generated by the property for a certain length of time. You can think of this as the **Yield**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FaJPedXwtphAGRsIkqRqJ%252Fimage.png%3Falt%3Dmedia%26token%3Deea15714-69f8-4bf5-ae55-8f8dff71efad&width=768&dpr=3&quality=100&sign=326c20c6&sv=2) 1 PT + 1 YT = 1 Underlying Asset At any point in time, you can combine both to get the whole property: circle-info With stETH as an example: **Principal** (Right to Principal of stETH) + **Yield** (Rights to stETH yield) = **Yield-bearing asset** (stETH) When you tokenize the yield, you can sell or trade the Yield portion even before maturity. This creates new ways to manage and even speculate on yield. Let’s say the maturity date is in 1 year: ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F9RUPVe1bONhALD88uqsf%252Fimage.png%3Falt%3Dmedia%26token%3Dca9b47e6-3c34-4272-8b5a-8ab7d908c68f&width=768&dpr=3&quality=100&sign=15a635cd&sv=2) * You can buy the Rights to Ownership at **a lower price** than an actual property. After 1 year, the rights entitle you to redeem the property. The guaranteed value appreciation from the discounted value of paper ownership → owning the property at its full value constitutes the fixed yield/income. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F7xa8ykhSM34zJ7YuSQtr%252Fimage.png%3Falt%3Dmedia%26token%3D2fe3f447-b877-41a5-b977-b3a439b8e0ac&width=768&dpr=3&quality=100&sign=e40c013b&sv=2) * You can also buy only the yield portion (the Rights to Rental Payments) to receive rent for 1 year. Assuming this costs $5000, you’ll profit when you collect more than $5000 within the year or suffer a loss when it yields less. Buying this lets you speculate on the property “yield”. Think the rental price is going up soon and you want some exposure? Buy the “yield” instead of paying the whole property price. circle-info 💡 Pendle is a marketplace where property owners can split and trade their principal (rights to the underlying) and yield (rights to rental payments) separately. Both Principal and Yield position can be sold anytime (no lockup) even before the maturity is up. [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#pt-and-yt-in-pendle) PT & YT in Pendle --------------------------------------------------------------------------------------------------------------------------------------------- DeFi pools gives you a yield-bearing position in return for staking or depositing tokens. In Pendle, the yield-bearing position can be split into two components: * **YT (Yield Token) -> representing the yield-receivables of the position** * **PT (Principal Token) -> representing the principal amount** When yield is tokenized, there is a **maturity** associated with the tokenization, demonstrated below. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FUsv1Pfz9TKMqFHjo2ULj%252Fimage.png%3Falt%3Dmedia%26token%3D89edf8e7-8b0d-4854-af96-9502a306ba2f&width=768&dpr=3&quality=100&sign=a1578424&sv=2) The $ value sum of PT and YT should equate to its underlying as they’re individual parts of a whole. You can redeem the underlying by depositing equal amount of PTs and YTs. On maturity, PT can be redeemed for its underlying without its YT counterpart (This is because matured YT have 0 value as they no longer generate yield). circle-info 💡 You can tokenize the yield-bearing tokens on Pendle by selecting any of the assets on Pendle in the Market page, and select the “Mint tab” at the left-hand side of the page. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FyfQXq0EfMtBF49LQxtbt%252Fimage.png%3Falt%3Dmedia%26token%3D745dd3bc-0e5e-410b-9bc0-6b720358e7c1&width=768&dpr=3&quality=100&sign=465645e9&sv=2) Minting PT and YT (Yield Tokenization) ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#what-are-pt-and-yt-exactly) **What are PT and YT exactly?** Here are the definitions of **PT** and **YT**: * **1 YT gives you the right to receive the yield of 1 unit of the accounting asset (e.g. 1 ETH, 1 DAI, 1 USDe, etc) until maturity, claimable in real-time.** * **1 PT gives you the right to redeem 1 unit of the accounting asset (e.g. 1 ETH, 1 DAI, 1 USDe, etc) upon maturity.** Using an example of sUSDe from Ethena, the naming convention for PT and YT is: * 1 YT-sUSDe (USDe) * 1 PT-sUSDe (USDe) With that example, the definition of PT and YT is: * 1 YT-sUSDe (USDe) -> Receive the yield of 1 USDe worth of sUSDe * 1 PT-sUSDe (USDe) -> Will be redeemable for 1 USDe worth of sUSDe * 1 YT-HLP (USDC) -> Receive the yield of 1 USDC worth of HLP * 1 PT-HLP (USDC) -> Will be redeemable for 1 USDC worth of HLP ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#what-can-you-do-with-pt-and-yt) What can you do with PT & YT? #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#before-maturity) Before Maturity: 1. PT and YT can be minted from the underlying asset. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FXYgr5qvhFzIxhgTQ7rUN%252Fimage.png%3Falt%3Dmedia%26token%3D7c75f8c3-278d-4b55-80be-e9486a095941&width=768&dpr=3&quality=100&sign=82337d67&sv=2) 2. PT and YT can be redeemed back into its underlying asset ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252Fl1zImmnjipcGtVieDKGt%252Fimage.png%3Falt%3Dmedia%26token%3Dc11c5c78-0ee1-4343-97f9-79ebf7cf8cdd&width=768&dpr=3&quality=100&sign=6aa132e7&sv=2) 3. YT holders can claim any accrued yield in real-time. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F5j73qgzuZWdNIRnRMxuX%252Fimage.png%3Falt%3Dmedia%26token%3Deb45b838-b394-4b24-9378-bfed2d90ce6f&width=768&dpr=3&quality=100&sign=171e0279&sv=2) #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#after-maturity) After Maturity * PT holders can redeem underlying asset 1:1 without YT. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F4C5kdAK4URqnEBkpPKuA%252Fimage.png%3Falt%3Dmedia%26token%3Dbe6d8e2e-8681-4a53-9a1f-6f00ab711ea3&width=768&dpr=3&quality=100&sign=e88f27fc&sv=2) #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#anytime) **Anytime** You can **buy and sell PT and YT** on the open market using Pendle AMM. As such, PT and YT will always have a market price. We will talk more about trading PT and YT in the next chapters. ### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#the-pt-yt-equation) **The PT / YT equation** circle-check PT Price + YT Price = Accounting Asset Price Since **1 unit of underlying asset mints 1 PT + 1 YT** and **1 PT + 1 YT redeems for 1 unit of the accounting asset**, there is an obvious relationship between their prices: The Pendle AMM ensures that this relationship holds true at all times. * * * [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#analogy-of-pt-and-yt-in-tradfi) Analogy of PT & YT in TradFi ------------------------------------------------------------------------------------------------------------------------------------------------------------------- In TradFi, what Pendle does is similar to bond stripping. The principal and interest of bonds are separated, so PTs are equivalent to [zero-coupon bondsarrow-up-right](https://www.investopedia.com/terms/z/zero-couponbond.asp) , while YTs are the detached [couponsarrow-up-right](https://www.investopedia.com/terms/c/coupon.asp) . #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#pt-is-the-defi-zero-coupon-bond) PT is the DeFi zero-coupon bond ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F4JnW5H5Ba8zDf5HwlWJb%252Fimage.png%3Falt%3Dmedia%26token%3Da723e25c-3b9f-4625-9f85-e2d1c48851c9&width=768&dpr=3&quality=100&sign=73980d2a&sv=2) A zero-coupon bond is a type of bond that does not pay any interest to the bondholder during the life of the bond. Instead, the bond is **sold at a deep discount** to its face value, and the **bondholder receives the full face value when the bond matures**. The difference between the purchase price and the face value is the investor’s return or profit. For example, if you buy a zero-coupon bond for $800 that has a face value of $1,000 and matures in 3 years, you will receive $1,000 at maturity and earn a profit of $200 for the 3 years of investment. circle-info Again, you don’t need to hold bonds to maturity, you can sell them on the open market at any time at market price. #### [hashtag](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#yt-is-the-defi-detached-coupon) YT is the DeFi detached coupon A detached coupon is a part of a coupon bond that has been separated from the bond and can be traded or sold separately. A coupon bond is a type of bond that pays regular interest payments to the bondholder until the bond matures. The interest payments are called coupons, and they are usually attached to the bond certificate. A detached coupon is a coupon that has been **cut off from the certificate** and **can be redeemed for cash by anyone who holds it**. For example, if you have a coupon bond that pays $50 every year for 3 years and you detach the coupons, you can sell it to someone else to wishes to claim that $150 over the 3 years. A person who buys the detached coupon below $150 makes a profit over the 3 years. circle-info 💡 The detached coupons can also be sold to the open market at any time at market price. > Additional reading: [Coupon Bond Vs. Zero Coupon Bond: What's the Difference? (investopedia.com)arrow-up-right](https://www.investopedia.com/ask/answers/06/zerocouponregularbond.asp) [PreviousChapter 1 - Introduction to Optimizing Yieldchevron-left](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-1-introduction-to-optimizing-yield) [NextPendle 101 - Key Takeawayschevron-right](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways) Last updated 10 months ago * [TL;DR](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#tl-dr) * [PT & YT in Pendle](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#pt-and-yt-in-pendle) * [What are PT and YT exactly?](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#what-are-pt-and-yt-exactly) * [What can you do with PT & YT?](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#what-can-you-do-with-pt-and-yt) * [The PT / YT equation](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#the-pt-yt-equation) * [Analogy of PT & YT in TradFi](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#analogy-of-pt-and-yt-in-tradfi) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 3.2 - More Yield via Liquidity Provision | Pendle Academy [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#liquidity-provision-on-pendle) Liquidity Provision on Pendle ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Similar to many other DeFi protocols, you can also deposit your asset to provide liquidity to Pendle pools. Pendle pools facilitate all other yield strategies discussed in this Academy. circle-info 💡 Liquidity provision on Pendle has no impermanent loss risk at maturity. #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#earn-extra-yields-on-top-of-your-otherwise-idle-yield-bearing-assets) Earn extra yields on top of your otherwise idle yield-bearing assets Liquidity providers receive returns from multiple avenues: * Native yields * Protocol yields/rewards from the underlying asset (e.g. yield from stETH, or ETH rewards distributed from GMX’s GLP) * Fixed yield from the PT component of the pool * Swap fees * $PENDLE incentives ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FeSLu2UEgB51ge9fmXzV1%252Fimage.png%3Falt%3Dmedia%26token%3D5bce68e8-bcdf-4759-a250-61ef7a89e507&width=768&dpr=3&quality=100&sign=2199f998&sv=2) vePENDLE lock ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#why-provide-liquidity-to-pendle-pools) Why provide liquidity to Pendle pools? 1. You **earn extra “free” yields**, including swap fees and $PENDLE incentives, on top of your otherwise idle asset 2. No impermanent loss (IL) at maturity. Pendle pools are denominated in your selected underlying asset _only_ (e.g. consists of the native stETH plus PT-stETH only in the stETH pools), which results in a single asset price exposure. 3. You are _**not**_ locked and can exit at any time. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#how-to-start-earning) How to start earning Providing liquidity on Pendle can be as simple as just a one-click transaction, allowing you to swap any assets you hold (e.g. USDC) into Pendle LP positions (e.g. Pendle LP-stETH). Similarly, you can even use other Pendle assets like [PT or YT](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) to deposit into a Pendle LP. 1. Go to the **Pools** page: [https://app.pendle.finance/trade/poolsarrow-up-right](https://app.pendle.finance/trade/pools) . 2. Deposit and start earning 1. Select an asset pool and a maturity date to provide liquidity to. You can also sort the list by the “Highest APY”. 2. Select your input asset and amount (which will be swapped to the pool’s asset, if necessary). This can be a different token to the underlying asset and we will find the best route to swap your asset. 3. Review output, approve and confirm the transaction. 3. If you have an open position: 1. Click “Dashboard” on the top menu to see your current LP positions. 2. You can return to the “Claim” button in “Dashboard” to claim your LP rewards (note that not all rewards are claimable, see FAQ). 3. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FXfDyuReH0pSAKT2kwQYf%252Fimage.png%3Falt%3Dmedia%26token%3D3c51c0c3-9624-494a-9789-95293e7c007a&width=768&dpr=3&quality=100&sign=5afb26f9&sv=2) **Am I locked until the maturity date? Can I exit early?** > You are _not_ locked at all, you can remove LP and exit at any time. **Do I have to hold until the maturity date to earn the advertised APY?** > No, the APY you earn from liquidity provision is independent of the maturity date. The PENDLE or native rewards are streamed to LPs all the time, exiting the pool before its maturity date does not change the amount of rewards streamed to you. **What tokens am I really exposed to in the LP pool?** > We will explain in more detail in[Chapter 7 - Providing Liquidity while Trading Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) > . In a nutshell, a Pendle pool consists of 2 components: (1) (a wrapped version of) the underlying asset, and (2) the PT version of it (usually in a smaller proportion). You can review the concept of PT in [Chapter 2 - Yield Tokenization Basics](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) > . **How is there no impermanent-loss (IL) at maturity?** > The main idea is that a Pendle pool only contains tokens that are highly correlated and denominated in the same asset you choose, so the price ratio between them does not change much. This means that IL is minimal and **guaranteed to be zero or none at maturity**. **How to claim LP rewards?** > You can claim your LP rewards by clicking the “Claim” button within “Dashboard” on the top menu. **Why don’t I see the underlying yield being claimable sometimes?** > Some assets, like stETH, wstETH, rETH, and gDAI, do not distribute yields explicitly, but rather increase their token value over time. Their yields are baked into their rising token price. Pendle pool swap fees also increase the pool value and do not need to be claimed. > > On the other hand, some assets, like GLP and Stargate-USDT, distribute yields to holders periodically. You will need to claim these yields manually. > > $PENDLE incentives are always claimable using the “Claim” button. **What is the “Zero Price Impact Mode” in the “Zap” interface in “Pendle Trade”?** > Please check out [Chapter 7 - Providing Liquidity while Trading Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#2.-how-to-be-yield-neutral-with-zero-price-impact-mode) ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#lp-as-part-of-your-yield-trading-strategy) LP as part of your yield-trading strategy Providing liquidity can also be part of your yield optimization or trading strategies because an LP position has a slightly bearish outlook on the underlying asset yield. This will be discussed in depth in [Chapter 7 - Providing Liquidity while Trading Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) [PreviousChapter 3.1 - Fixed Yield on Pendlechevron-left](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) [NextChapter 4 - Yield Trading Basics with YTchevron-right](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) Last updated 2 months ago * [Liquidity Provision on Pendle](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#liquidity-provision-on-pendle) * [Why provide liquidity to Pendle pools?](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#why-provide-liquidity-to-pendle-pools) * [How to start earning](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#how-to-start-earning) * [LP as part of your yield-trading strategy](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision#lp-as-part-of-your-yield-trading-strategy) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 3.1 - Fixed Yield on Pendle | Pendle Academy > Course level: **#intermediate**. [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#fixed-yield-with-pt) Fixed Yield with PT ---------------------------------------------------------------------------------------------------------------------------------------------------------------- With a fixed yield deposit, you are **guaranteed to earn the displayed amount of your chosen underlying asset** if you hold the position until the maturity date. In the example below, if you deposit 1 stETH, you can redeem ~1.17 stETH on 29th of December 2027, earning a fixed profit of ~0.17 stETH or an annualized rate of ~4.687%. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FFkYzM42tfAuZQfghCnEW%252Fimage.png%3Falt%3Dmedia%26token%3D2629464b-a651-421a-9b02-c132741bb4d9&width=768&dpr=3&quality=100&sign=67486770&sv=2) Volatility-proof yield - what you see is what you get circle-check 💡 Think of it like a term-deposit account, or a CD (Certificate of Deposit) offered by commercial banks, but it’s even better with Pendle as **your deposit is** _**not**_ **locked** and **can exit at any time**. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#why-earn-fixed-yield) Why earn fixed yield? DeFi yield often declines over time. With Pendle fixed yield, you can secure the yield you like on Pendle Earn, and then relax. No more checking the APRs every day and hopping from farm to farm. circle-info 💡 A fixed yield deposit can also be a viable alternative to spot, with similar risk exposure, and the benefit of downside cushion thanks to the Fixed Yield realized upon redemption. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#where-does-the-yield-come-from) Where does the yield come from? Behind the scenes, you are swapping your deposit for the [**Principal Token**](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics#pt-and-yt-in-pendle) **(PT)** of your chosen asset. You buy the PT (PT-stETH in this example) **at a lower price** than the underlying asset (stETH in this example). Your PT can be **redeemed 1:1 for the underlying asset** (stETH in this example) at or after the maturity date. In other words, the price difference is your yield at maturity. You can refer back to [Chapter 2](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) where we explained how PT can be sold at a discount by using yield tokenization, and how it works just like zero-coupon bonds in TradFi. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F1LTEf3zeGEqZMZa2Pzfa%252Fimage.png%3Falt%3Dmedia%26token%3Dfb9ce912-bc25-430c-9a08-ff70760081fb&width=768&dpr=3&quality=100&sign=cb59af7&sv=2) ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#how-to-start-earning) How to start earning 1. Go to the Markets page: [https://app.pendle.finance/trade/marketsarrow-up-right](https://app.pendle.finance/trade/markets) . 2. Deposit and start earning 1. Select an asset and a maturity date you like. You can also sort the list by the “Highest Fixed APY”. 2. Click on the “PT - Fixed APY” box to continue. 3. Select your input asset and amount (which will be swapped to the pool’s asset to buy PT, if necessary). This can be a different token to the underlying asset and we will find the best route to swap your asset. 4. Review how much you will be able to redeem at maturity (i.e. the actual earning) and the effective Fixed APY you will earn. 5. Approve and confirm the transaction. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FZoElBrYOnrI7vqaZydb4%252Fimage.png%3Falt%3Dmedia%26token%3D9822d39c-4bda-4ea5-ad41-93eda41c7921&width=768&dpr=3&quality=100&sign=def35093&sv=2) ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#faq) FAQ **Am I locked until the maturity date? Can I exit early?** > You are _not_ locked at all, you can exit at any time by selling your position (which is a PT) at market price on Pendle’s AMM (through “Pendle Trade” interface). **Do I earn less or even lose money if I exit early?** > It depends on the market price of PT (after deducting trading fees and slippage). The market price is driven by buyers'/sellers' activities, and generally, if the market expects the asset to generate higher APY%, PT price may drop in the short term. Conversely, if the market expects the asset to generate lower APY%, PT price may rise in the short term. > > _However_, note that **time works in your favor** in this strategy because PT price gradually closes its gap to the underlying asset (in other words, the PT price relative to the underlying asset increases over time), and eventually becomes 1:1 to the underlying asset at maturity date. So you don’t need to worry even if PT price fluctuates in the short term. You may even take early profit by exiting early when PT price rises too. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FtpoHJJzzX4ycgpZUxACx%252Fimage.png%3Falt%3Dmedia%26token%3D4b816da9-7de5-4030-831a-8f1ee73deb4a&width=768&dpr=3&quality=100&sign=bddfbecf&sv=2) You can sell your position at any time at market price. Market prices may fluctuate but eventually converge to the full underlying asset price. **The fixed yield APY% being offered on Pendle changes over time, does that affect my earnings?** > No, you are **guaranteed to the fixed yield APY% when you open your position**. The new rate only affects new deposits or newly opened positions. It is just like bonds or CDs in TradFi, the market rate can change daily but once you open your position, you’re secured to the rate at that time. **When is a good time to open a fixed-yield position?** > The simple answer is when the APY% offered is high. Of course, we can’t predict how the market will behave, so as long as you are satisfied with earning 4% with your stETH for example, go for it. > > Also, if you expect the underlying asset’s APY to go down (let’s say you think ETH staking yield will drop because more people will join staking), the fixed yield strategy will benefit you because: > > 1. You secured a higher APY% before it goes down > > 2. PT market price may rise in the short term compared to your purchase price if other traders think the same (to buy more PTs or sell their YTs which pushes up PT’s market price), and you may be able to close your position early with a profit > **Do I have to claim my yield?** > No. You earn by getting a lower price when you buy PT. You are guaranteed to redeem 1:1 the underlying asset at or after the maturity date, thereby fully realizing the discount as profit. > > You’ll need to manually redeem the underlying at maturity. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#pt-as-a-short-yield-strategy) PT as a short-yield strategy > Check out [Chapter 6 - Shorting Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) > for a deep dive into how the strategy also works _as a short-yield strategy_ and how to look for the best time to enter or exit. [PreviousPendle 101 - Key Takeawayschevron-left](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways) [NextChapter 3.2 - More Yield via Liquidity Provisionchevron-right](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision) Last updated 10 months ago * [Fixed Yield with PT](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#fixed-yield-with-pt) * [Why earn fixed yield?](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#why-earn-fixed-yield) * [Where does the yield come from?](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#where-does-the-yield-come-from) * [How to start earning](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#how-to-start-earning) * [FAQ](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#faq) * [PT as a short-yield strategy](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle#pt-as-a-short-yield-strategy) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 5 - Important concepts in yield trading | Pendle Academy > Course level: **#intermediate** We have introduced the various terms and jargon in [Chapter 4 - Yield Trading Basics](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) . Let’s explore these important yield trading concepts in more depth. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#pt--yt-underlying-asset) PT + YT = Underlying asset As a reminder, the core of Pendle’s [yield tokenization](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) is to split a yield-bearing token into PT and YT. The price of the two tokens adds up to the price of the underlying asset. Therefore, the price of PT and YT must be **inversely correlated** — the higher the YT price, the lower the PT price, and vice versa. circle-exclamation 💡 Key takeaway: **PT and YT are just two sides of the same coin — the Implied APY** ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#underlying-apy) Underlying APY Underlying APY represents the 7-day moving average yield rate of the underlying asset. This approach allows a more accurate indication of the underlying yield over a period of time. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) Implied APY Implied APY is the current **market consensus of the yield** of an asset. In other words, it is the “price” of YT, denoted in percentage terms. **The implied APY changes over time, depending on the supply and demand of YT and PT in the market**. The more people buy YT, or sell PT (remember they are just two sides of the same coin), the higher the implied APY is, and the more expensive the YT is (or the cheaper the PT is), and vice versa. Here is a table that summarizes the how market activities affect implied APY: Buy/Sell YT PT Buy Implied APY ↑ Implied APY ↓ Sell Implied APY ↓ Implied APY ↑ circle-info 💡 Key takeaway: Think of **implied APY as the measure of how valuable the YT is**. It is the price of YT, denoted in yield % terms. circle-info 💡 Key takeaway: Pendle is **a marketplace of** _**Implied APYs**_ of different assets. (Akin to how Uniswap is a marketplace of _spot prices_ of different assets) ImpliedAPY\=\[(1+YTpricePTprice)365DaysToMaturity\]−1ImpliedAPY = \[(1+\\frac{YTprice}{PTprice})^\\frac{365}{DaysToMaturity} \]-1ImpliedAPY\=\[(1+PTpriceYTprice​)DaysToMaturity365​\]−1 It is not required to fully understand the math behind implied APY, but you can notice two things from it: 1. **The underlying APY does not directly affect the implied APY** Implied APY depends on the demand of YT or PT, which is determined by market forces. So, even if the underlying APY stays the same, the implied APY can still fluctuate due to shifts in market sentiment. 2. **With a constant implied APY, YT price decreases and PT price increases over time** Even if the market has no trading activity at all (and thus the implied APY stays the same), time will also affect the price of YT and PT. This is rational, as time approaches expiry (maturity), there are less yield remaining to collect for YT, hence its price decline. YT’s price decline in turn causes PT price to trend upwards, being equal to its underlying at maturity. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#long-yield-apy) Long Yield APY The long yield APY is the _**estimated**_ **return** (expressed as annualized percentage yield) that you can get **by** **buying YT and holding it until maturity**, assuming the underlying APY remains at its current value. This value can be negative, meaning that the total value of the future yield based on the current underlying APY will be less than the cost of buying YT. In simple terms, the long yield APY represents the difference between the underlying APY (estimated yield to receive) and the implied APY (cost of YT). If you buy and hold YT, you want this value to stay positive, the higher the better. circle-info 💡 Key takeaway: The long yield APY gives you a _**clue**_ if the YT is currently cheap (when positive) or expensive (when negative). Learn more about how to value YT and PT at [Chapter 9 - Identifying Opportunities to Long/Short Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield) ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#fixed-apy) Fixed APY Fixed APY is the guaranteed yield you will receive if you buy and hold the PT now. This value is numerically equivalent to the Implied APY. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#example-1) Example 1 ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FQlFB0o1kBnQ0cwwnkIE6%252Fimage.png%3Falt%3Dmedia%26token%3D3a0a517a-4dd1-4d40-a59f-e7a3ecf27cc6&width=768&dpr=3&quality=100&sign=19b309b2&sv=2) The image above is an example of a yield-bearing asset on Pendle. sDAI is the DAI savings rate by MakerDAO (Spark Protocol) and it is currently generating 5% yield. The implied APY on Pendle shown above is 3.89%, which means YT-sDAI-2024 is currently priced at 3.89%. circle-info 💡 If you think that the average yield of sDAI (underlying APY) is going to be above its implied APY until maturity, purchasing YT will be a good decision. Purchasing YT-sDAI in this instance will yield 5% while costing 3.89%, since you’ll be receiving more than what you’re spending, Long Yield APY in this instance is positive (29.42% as shown in the attached image). [PreviousChapter 4 - Yield Trading Basics with YTchevron-left](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) [NextOptimizing Yields with Pendle - Key Takeawayschevron-right](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways) Last updated 1 year ago * [PT + YT = Underlying asset](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#pt--yt-underlying-asset) * [Underlying APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#underlying-apy) * [Implied APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) * [Long Yield APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#long-yield-apy) * [Fixed APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#fixed-apy) * [Example 1](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#example-1) sun-brightdesktopmoon sun-brightdesktopmoon --- # Optimizing Yields with Pendle - Key Takeaways | Pendle Academy > Course level: **#intermediate** circle-info 💡 Review [Pendle 101 key takeaways](https://pendle.gitbook.io/pendle-academy/pendle-101/pendle-101-key-takeaways) if you need to refresh your memory about what is PT and YT in Pendle. [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#simple-yield-farming-on-pendle) Simple Yield Farming on Pendle ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#id-1.-earn-fixed-yield) 1\. Earn fixed yield * Go to [Marketarrow-up-right](https://app.pendle.finance/trade/markets) . Select an asset and click the “PT - Fixed APY” box to continue. * You are **guaranteed to earn the displayed amount of your chosen underlying asset** if you hold until the maturity date. * ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FcYszqjMrhjsh5neSDMex%252Fimage.png%3Falt%3Dmedia%26token%3D26fa0b02-0e7c-42c3-bd7c-f57894c35ca9&width=768&dpr=3&quality=100&sign=fe2a4a25&sv=2) In this example, you are guaranteed to earn ~0.17 stETH (which is ~4.6% APY) on 29th Dec 2027. * The fixed yield comes from the discount you get from buying the Principal Token (**PT**) **at a lower price** than the underlying asset. Your PT can be **redeemed 1:1 for the underlying asset** at or after the maturity date. In other words, the price difference is your yield at maturity. * The PT can be a viable alternative to spot, with similar risk exposure, and the benefit of downside cushion thanks to the Fixed Yield realized upon redemption. * **You are** _**not**_ **locked** and **can exit at any time**, even before the maturity date. * If you exit early, your actual earning will depend on the market price of PT, which is driven by buyers/sellers activities (supply and demand). So you may earn higher or lower (and in extreme cases, at a loss) than the fixed APY at entry. * Note that **time works in your favor** because PT price gradually closes its gap (i.e. rises) to the underlying asset, and becomes 1:1 to the underlying asset at the maturity date. So you don’t need to worry about short term price fluctuations. * You may even take early profit by exiting early when PT price rises. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FX6DCCpEAVarckyZOdDUa%252Fimage.png%3Falt%3Dmedia%26token%3Dac75a5b2-9b3c-42ac-85a8-70a1c9ae2dcf&width=768&dpr=3&quality=100&sign=cf3b4511&sv=2) Example showing PT price gradually rises to the redeem price ($1 in this case) over time despite short term fluctuations. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#id-2.-liquidity-provision) 2\. Liquidity provision * Go to the “[Poolsarrow-up-right](https://app.pendle.finance/trade/pools) ” and select an asset to continue. * You can deposit your yield-bearing assets to provide liquidity to Pendle pools to **earn extra “free” yields on top the native yields using the same assets.** * LP receives returns from multiple avenues: * Native yields * Yields/rewards from the underlying asset (e.g. yield from stETH, or ETH rewards distributed from GMX’s GLP) * Fixed yield from the PT component of the pool * Swap fees * $PENDLE incentives * LP is denominated in your selected underlying asset _only_ (e.g. native stETH plus PT-stETH only in the stETH pools) * you are not exposed to price actions of uncorrelated assets * **ultimately no impermanent-loss (IL) concern at maturity** * **You are** _**not**_ **locked** and **can exit at any time**, even before the maturity date. The APY you earn from liquidity provision is also independent of the maturity date. * * * [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#yield-trading-basics) Yield Trading Basics ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#buy-yt-to-long-yield) Buy YT to long yield * Go to [Marketarrow-up-right](https://app.pendle.finance/trade/markets) . Then select your asset and click “YT”. * Buying a YT means you are **increasing your yield exposure (long yield)**. You can either hold it until maturity, or buy low and sell high to turn a quick profit. * You profit when either or both… 1. the price of YT rises (then you may sell it off for a capital gain), 2. the yield produced by the YT becomes bigger than your cost buying the YT * This strategy works well when you expect the underlying APY of an asset to rise in the future, or when you think the YT price is undervalued. * Since YT is typically much cheaper than the underlying asset, you _effectively_ get **leveraged yield exposure** by buying YT, with no actual borrowing involved, so there’s **no risk of liquidation or oracle errors**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FCFIYJXEbhaBb8o7T85Tm%252Fimage.png%3Falt%3Dmedia%26token%3D156047ce-bf62-4415-98a0-c91bcc9bae3f&width=768&dpr=3&quality=100&sign=3f64f32&sv=2) With the cost of 1 stETH, you are buying yield exposure of 11.9 stETH. An 11.9x leverage in notional value in this case. * Here’s a table that quickly summarises what is going in favor or against you as a YT holder. Just flip the arrows’ directions if the indicators go the other way round. Indicators👇 / Effect 👉 YT Price YT Yield Receivables Underlying asset price ⤴️ ⬆️ ┄ Implied APY ⤴️ ⬆️ ┄ Underlying APY ⤴️ ┄ ⬆️ Long Yield APY ⤴️ ┄ ⬆️ Time to maturity ⤵️ ⬇️ (slowly) ┄ * * * [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#important-concepts-in-yield-trading) Important concepts in yield trading ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#pt--yt-underlying-asset) **PT + YT = Underlying asset** * So the higher the YT price, the lower the PT price, and vice versa. * **PT and YT are just two sides of the same coin** #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#underlying-apy) **Underlying APY** * The yield of the underlying asset. Pendle displays a 7-day moving average in the app. * Note that the underlying APY does _not_ directly affect the implied APY #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#implied-apy) **Implied APY** * Represents the **market** _**consensus**_ **of the future APY** of an asset * It changes depending on the supply and demand of YT and PT in the market Buy/Sell YT PT Buy Implied APY ↑ Implied APY ↓ Sell Implied APY ↓ Implied APY ↑ * **It is the measure of how valuable the YT is** * In layman's terms, implied APY is the “price of YT” in yield % terms (and the inverse price of PT) circle-info 💡 Key takeaway: Pendle is **a marketplace of** _**Implied APYs**_ of different assets. (Akin to how Uniswap is a marketplace of _spot prices_ of different assets) #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#long-yield-apy) Long Yield APY * is the _**estimated**_ **return** (expressed as annualized percentage yield) that you can get **by** **buying YT and holding it until maturity**, assuming the underlying APY stays the same at its current value. * Its value can be negative if the total value of the future yield based on the current underlying APY will be less than the cost of buying YT. * Gives you a _**clue**_ if the YT is currently cheap (when positive) or expensive (when negative) #### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#fixed-apy) Fixed APY * is the guaranteed yield you will receive if you buy and hold PT now * numerically equivalent to the Implied APY [PreviousChapter 5 - Important concepts in yield tradingchevron-left](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading) [NextPT / YT / LP Cheatsheetchevron-right](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet) Last updated 2 months ago * [Simple Yield Farming on Pendle](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#simple-yield-farming-on-pendle) * [1\. Earn fixed yield](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#id-1.-earn-fixed-yield) * [2\. Liquidity provision](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#id-2.-liquidity-provision) * [Yield Trading Basics](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#yield-trading-basics) * [Buy YT to long yield](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#buy-yt-to-long-yield) * [Important concepts in yield trading](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways#important-concepts-in-yield-trading) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 4 - Yield Trading Basics with YT | Pendle Academy > Course level: **#intermediate** You’ve made it through the first 3 chapters and learned the [basics of PT and YT](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) , as well as how to use Pendle to [earn passive income](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) from yield. Great job! Now let’s dive deeper to execute various kinds of yield trading strategies through buying and selling YT. [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#yield-trading-101-with-yt) Yield Trading 101 with YT --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- In this chapter, we will tap into the simplest form of yield trade — _buying a YT (Yield Token)._ ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#buy-yt-to-long-yield) Buy YT to long yield One way to trade yield with Pendle is to buy YT ([Yield Token](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) ). That means you are **increasing your yield exposure (long yield)**. You can either hold it until maturity, or swing-trade it to turn a quick profit, if you buy low and sell high. This strategy works well when you expect the underlying APY of an asset to rise in the future, or when you think the YT price is undervalued (we’ll explain more later). circle-info 💡 Remember: YT holders receive the yield of the underlying asset ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FDHcxQYOPrYWiN3Mu9KxU%252Fimage.png%3Falt%3Dmedia%26token%3Da1882a45-a531-4945-b64b-19c83845c2c2&width=768&dpr=3&quality=100&sign=5fea6e25&sv=2) Go to “Market” under the “Trade” interface from the top menu bar. Then choose your asset and click “YT”. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#get-leveraged-yield-exposure-without-borrowing-risk) **Get leveraged yield exposure without borrowing risk** Since YT is typically much cheaper than the principal, you _effectively_ get **leveraged yield exposure** by buying YT. For example, in the image below, you can earn the yield of ~11.9 stETH with just the cost of 1 stETH, which is an 11.9x effective leverage in _notional value traded_. There’s **no borrowing involved**, so there’s **no risk of liquidation or oracle errors**. The leverage is simply achieved by [Yield Tokenisation](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) , which lets you buy only the yield portion of the asset for a small fraction of the original price. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FZUuKyv105pyKZNSKcwZm%252Fimage.png%3Falt%3Dmedia%26token%3Dedff3a21-6046-4255-9816-d27a1c72db33&width=768&dpr=3&quality=100&sign=e5d00bcb&sv=2) With the cost of 1 stETH, you are buying yield exposure of 11.9 stETH. An 11.9x leverage in notional value in this case. ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#how-do-i-profit-from-buying-yt) **How do I profit from buying YT?** You profit when either: 1. YT price increases, or 2. Yield received from YT is more than the cost of buying YT Generally speaking, you are betting that either or both… 1. the **implied APY** rises after you buy (which pumps the YT price), and implied APY is driven by **market force** (supply & demand of YT and PT) 2. the **underlying APY** and/or the **long yield APY** becomes higher (which means yield is being produced faster) triangle-exclamation 💡 Don’t worry if you are not familiar with the different kinds of APYs and jargons, we will cover those in the [next chapter](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading) . For now, the summary table below should be enough for most situations. Here’s a table that quickly summarizes what is going in favor or against you as a YT holder. Just flip the arrows’ directions if the indicators go the other way round. Indicators👇 / Effect 👉 YT Price YT Yield Receivables Underlying asset price ⤴️ ⬆️ ┄ Implied APY ⤴️ ⬆️ ┄ Underlying APY ⤴️ ┄ ⬆️ Long Yield APY ⤴️ ┄ ⬆️ Time to maturity ⤵️ ⬇️ (slowly) ┄ In simple terms: * **A good time to buy YT** is when the implied APY is low, which means the YT price is low. You also want to make sure the long yield APY is positive (the higher the better), which suggests that the YT _may_ be undervalued. * **A good time to sell YT** is just the opposite — when the implied APY is high, which means the YT price is high. Also, when the long yield APY is close to zero or even negative, it suggests that the YT _may_ be overvalued. circle-info 💡 More on how to better determine when it is a good time to buy or sell YT, in our [Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure)](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) . ### [hashtag](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#how-to-buy-yt) **How to buy YT** 1. Go to the “Markets” page [https://app.pendle.finance/trade/marketsarrow-up-right](https://app.pendle.finance/trade/markets) from the top menu. 2. Choose an asset and buy its YT 1. Select an underlying asset and a maturity date you like. Look for one with high underlying APY and/or low implied APY. 2. Click on the “YT - Long Yield APY” box to continue. 3. Select your input asset and amount (which will be swapped to the pool’s asset to buy YT, if necessary). This can be a different token to the underlying asset and we will find the best route to swap your asset. 4. Review the effective implied APY after price impact and fees, which is also the effective cost of your YT, and the effective long yield APY you will earn. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FRbEPZuro5KgdX9fD9URe%252Fimage.png%3Falt%3Dmedia%26token%3D0a849ed6-03bf-4fa4-846c-7210ea8a2ddb&width=768&dpr=3&quality=100&sign=efaac7a8&sv=2) Review the effective implied APY, long yield APY and price impact. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252Fj9KZKOWc1McOj24GDF0Y%252Fimage.png%3Falt%3Dmedia%26token%3D1e9076a7-ba16-458c-8d75-6c6850d005e5&width=768&dpr=3&quality=100&sign=54125ede&sv=2) Review the different scenarios of your profit projections. You can also use the “Calculator” on the bottom right of the page to run customized projections. 1. Approve and confirm the transaction. 2. If you have an open position, click **“Dashboard”** on the top menu to see your current positions. You can later click the **“Claim”** button to claim the yield produced by your YT. circle-exclamation Remember: **You can exit and sell your YT positions at any time.** The Pendle market is 24/7. There’s never any lock or penalty to close your position early in Pendle. [PreviousChapter 3.2 - More Yield via Liquidity Provisionchevron-left](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.2-more-yield-via-liquidity-provision) [NextChapter 5 - Important concepts in yield tradingchevron-right](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading) Last updated 1 year ago * [Yield Trading 101 with YT](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#yield-trading-101-with-yt) * [Buy YT to long yield](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#buy-yt-to-long-yield) * [Get leveraged yield exposure without borrowing risk](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#get-leveraged-yield-exposure-without-borrowing-risk) * [How do I profit from buying YT?](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#how-do-i-profit-from-buying-yt) * [How to buy YT](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt#how-to-buy-yt) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 7 - Providing Liquidity while Trading Yield | Pendle Academy > Course level: **#advanced** Let’s first look at what exactly makes up a Pendle AMM liquidity pool. [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#pendle-pool-composition) Pendle Pool Composition ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- A Pendle pool consists of PT and SY. Let’s use stETH as an example of our underlying asset. A stETH pool (for any maturity date) consists of two tokens: * **PT**\-stETH * **SY**\-stETH **SY** is a wrapped version of the underlying asset, which gives Pendle a standard way to interact with any yield mechanism and split it into PT & YT. You can think of SY the same as the underlying yield-bearing asset. > Notice that there’s no YT in the pool, because both PT and YT are traded through the same pool of liquidity. This is made possible by using a pseudo-AMM with [flash swapsarrow-up-right](https://docs.pendle.finance/ProtocolMechanics/LiquidityEngines/AMM#flash-swaps) > , which we won’t go into details here. [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-1.-zap-to-provide-liquidity-to-long-pt) 1\. Zap to provide liquidity to Long PT --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- **The best of both worlds: Earn fixed yield and swap fees with PT liquidity pools** [Holding PT](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#2.-how-to-be-yield-neutral-with-zero-price-impact-mode) gives you fixed yield that does not change with market conditions, and is a safe strategy that can still offer high returns. PT can also be used to provide liquidity in our liquidity pools to earn extra yields. When you provide liquidity with PT and the underlying asset (e.g. PT-stETH + stETH), you can earn: 1. Swap fees from the pools 2. $PENDLE incentives 3. Native yields 1. A portion of PT fixed yield 2. A portion of the underlying yield You can withdraw your PT from the pool at any time and sell it for profit, or redeem it for the underlying asset after maturity. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#how-to-ape) How to Ape Pendle makes it easy for you to enter this strategy with the Zap function. It automatically converts your input token into PT and the underlying asset and adds them to the pool. To use this strategy, follow these steps: 1. Go to the [Poolsarrow-up-right](https://app.pendle.finance/trade/pools) page. 2. Select the pool of your desired asset. 3. Deposit the token of the underlying asset, or any other token, and receive LP tokens in return. circle-exclamation 💡 Your LP position is _**not**_ **locked** and you can **exit at any time**, even before the maturity date. The APY you earn from liquidity provision is also independent of the maturity date. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#how-this-strategy-is-also-a-short-yield-position) **How this strategy is also a short-yield position**? As we explained in [Chapter 6 - Shorting Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) , providing liquidity with PT means that you have a slightly bearish view on the underlying yield and you are shorting it. In other words, this strategy gives you **some protection against the falling yield rate** of the asset. If you want to maintain a yield-neutral LP position, you can read the next section. [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-2.-how-to-be-yield-neutral-with-keep-yt-mode) 2\. **How to be yield-neutral with “Keep YT mode”** --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- If you want to provide liquidity without taking a net short-yield position, you can use the “**Keep YT** mode” option when you Zap in. Recall that a Pendle liquidity pool is made up of PT and the underlying asset. By default, when you Zap to provide liquidity, some of the underlying assets are used to buy PT from the PT/SY pool, and the rest is wrapped into SY. However, this purchase of PT can affect the price and the yield. #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#what-is-keep-yt-mode) What is **“Keep YT mode”?** If you enable this mode, the underlying asset is fully converted into SY, a portion of which is used to mint PT and YT. The PT and the remaining SY are then used for liquidity provision, while keeping the YT in your wallet. This avoids buying PT during the Zap, thus won’t cause any price impact. This option is for intermediate or advanced users, because you will need to know how to [manage your YT position](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-4-yield-trading-basics-with-yt) . #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#yield-neutral) Yield-neutral By using this option, you balance out the effect of the PT in your LP position with the YT in your wallet. This means that you are yield-neutral instead of short-yield. #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#when-not-to-use-keep-yt-mode) **When not to use “Keep YT” mode?** You may not want to use this option if: * You don’t want to manage a YT position * for example, on Ethereum mainnet, it may not be worth maintaining a small YT position due to gas costs * You think the YT price is too overvalued (in other words, the PT is too cheap and you want to own more PT in the pool) [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-3.-how-to-use-an-lp-position-as-part-of-yield-trading) 3\. How to use an LP position as part of yield trading --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#zap-in-when-implied-apy-fixed-apy-is-high) Zap in when Implied APY / Fixed APY is High One way to use an LP position as part of yield trading is to enter when the Implied APY is high, and exit when it is low. This is similar to buying PT, which is best to enter when the Implied Yield is high. When the Implied APY is high, that means PT is cheaper (relative to the underlying token), and the resulting fixed yield APY is higher. When the Implied APY is low, that means PT is more expensive, and you can look to exit the LP position for an early profit. You can also hold the LP position and continue earning yield from the pool until maturity, after which the PT can then be redeemed 1:1 for the underlying asset. #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#shorting-yield-with-lp) **Shorting Yield with LP** Recall that _Long PT = Short yield_. You can quickly switch between Long and Short yield positions by zapping between YT and LP, instead of YT and PT. An LP position partially holds PT and achieves the same objective of "shorting" yield, while also earning extra yields (from swap fees, PENDLE incentives, and SY rewards) on top of the PT fixed yield. #### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#no-impermanent-loss-il-concern) **No Impermanent Loss (IL) Concern** You don’t have to worry about impermanent loss (IL) when providing liquidity in a Pendle pool. This is because a Pendle pool consists of PT and the underlying asset only, which are highly correlated and denominated in the same asset, so their price ratio does not fluctuate much. This means that IL is minimal before maturity. And thanks to the fact that PT is 1:1 redeemable at maturity, IL is also **guaranteed to be zero or none at maturity**. circle-check See how Pendle LP historically fared well against impermanent losses in the studies below. * **Pendle LP Performance Study -** [**Part 1**arrow-up-right](https://medium.com/pendle/evaluating-performance-of-pendle-liquidity-pools-part-1-f81e6957837d) * LP on Pendle vs. holding underlying asset w/o yield (e.g. ETH) * LP outperforms holding the underlying asset (e.g. ETH) in all cases studied here, even when excluding PENDLE incentives * No IL was observed in all cases studied here * The longer one LPs on Pendle, the greater the outperformance * **Pendle LP Performance Study -** [**Part 2**arrow-up-right](https://medium.com/pendle/evaluating-performance-of-pendle-liquidity-pools-part-2-3d085872a603) * LP on Pendle vs. depositing in the underlying pool (e.g. stETH) * LP generally outperforms non-Pendle users, even when excluding PENDLE incentives * In the worst case, IL was observed to be 0.85% only * When including PENDLE incentives, there was zero IL in the stETH and gDAI pools * The performance of an LP using **Keep YT** Mode vs. without depends on the Underlying and Implied APY of the pool. Regardless, Pendle LPs still generally outperform non-Pendle users. circle-info 💡 **Estimate Profit with Calculator** Look for the calculator icon next to the "Approve" or "Zap In" button. The calculator lets you estimate the potential profit for strategies such as Buy PT or Buy YT, and compares it to just holding the original asset. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FYJJ0qeRGA07OJEKnnCKr%252Fimage.png%3Falt%3Dmedia%26token%3Dd56a82d9-366c-410c-b7fb-be4a83f4b452&width=300&dpr=3&quality=100&sign=cccec33c&sv=2) [PreviousChapter 6 - Shorting Yieldchevron-left](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) [NextChapter 8 - Long Yield (Obtain Leveraged Yield-Exposure)chevron-right](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) Last updated 2 months ago * [Pendle Pool Composition](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#pendle-pool-composition) * [1\. Zap to provide liquidity to Long PT](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-1.-zap-to-provide-liquidity-to-long-pt) * [How to Ape](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#how-to-ape) * [How this strategy is also a short-yield position?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#how-this-strategy-is-also-a-short-yield-position) * [2\. How to be yield-neutral with “Keep YT mode”](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-2.-how-to-be-yield-neutral-with-keep-yt-mode) * [3\. How to use an LP position as part of yield trading](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield#id-3.-how-to-use-an-lp-position-as-part-of-yield-trading) sun-brightdesktopmoon sun-brightdesktopmoon --- # Withdrawals / Deposits from Other Chains | Pendle Academy Pendle exists in multiple chains + L2s and certain assets that Pendle supports on these chains might not be native to the chain. These assets might have liquidity constraints on external DEXes which can affect user experience on Pendle, especially when interacting via a different asset (e.g: Using USDT to purchase PT-sUSDE on Arbitrum -> Pendle will utilize external DEXes to swap USDT to sUSDE prior to purchasing PT). To avoid heavy price impacts from external DEXes in such situations, you can consider interacting with the asset's home chain (usually Ethereum mainnet): #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/withdrawals-deposits-from-other-chains#withdrawal-guide-for-non-native-assets-in-l2) Withdrawal Guide for non-native assets in L2: 1. Bridge to Ethereum Mainnet 1. Use the underlying protocol's dedicated bridge (if any, refer to the respective protocol's docs for more info) 2. Or use your preferred bridge aggregator 2. Withdraw natively via the underlying protocol 1. Go to the underlying protocol's website / dApp and withdraw. If the same asset is available on Pendle on Ethereum, check out the info page for the URL.![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FA8iFVxvBaBdF0Uelc6uR%252Fimage.png%3Falt%3Dmedia%26token%3Dfede0585-d213-403e-bf04-320f1910d0d9&width=300&dpr=3&quality=100&sign=1d22be57&sv=2) #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/withdrawals-deposits-from-other-chains#deposit-guide-for-non-native-assets-in-l2) Deposit Guide for non-native assets in L2: 1. Deposit natively via the underlying protocol 1. Go to the underlying protocol's website / dApp. If the same asset is available on Pendle on its home chain, check out the info page for the URL. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FA8iFVxvBaBdF0Uelc6uR%252Fimage.png%3Falt%3Dmedia%26token%3Dfede0585-d213-403e-bf04-320f1910d0d9&width=300&dpr=3&quality=100&sign=1d22be57&sv=2) 2. Bridge to the destination network 1. Use the underlying protocol's dedicated bridge (if any, refer to the respective protocol's docs for more info) 2. Or use your preferred bridge aggregator [PreviousPoints Support Pagechevron-left](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page) Last updated 1 year ago sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 9 - Identifying Opportunities to Long/Short Yield | Pendle Academy > Course level: #**advanced** [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#tldr) TLDR --------------------------------------------------------------------------------------------------------------------------------------------------- The objective of this strategy is to maximize your APY on the underlying asset by switching between the 2 possible positions: 1. [**Hold PT (short yield)**](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) 2. [**Hold YT (long yield)**](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) Since yields in DeFi are constantly fluctuating, Implied APY on Pendle markets also fluctuates. As Implied APY fluctuates, the market will swing between two modes: ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FBwRYh4psPuNlAOiQq3LH%252Fimage.png%3Falt%3Dmedia%26token%3Dcf194b44-1a66-4faf-9ccb-da523baa389a&width=768&dpr=3&quality=100&sign=36c0519a&sv=2) Hence, if you can time the market well and alternate between selling and buying PT and YT, you can potentially get greater profits. This is essentially swing trading for yield. However, if you are unsure of the yield movements, you can also simply hold the underlying asset to hedge against both sides. [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#the-3-modes-of-the-yield-market) The 3 modes of the yield market --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252Fii7LctCjeczfmmRNLsfA%252Fimage.png%3Falt%3Dmedia%26token%3Dc61e1b77-0bb8-4982-917a-db7046a82c0b&width=768&dpr=3&quality=100&sign=5f1eaefc&sv=2) ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#cheap-pt-mode) **CHEAP PT MODE** When Implied APY is high (overvalued), PT is cheap with a high fixed APY, **holding PT tends to be the best strategy.** When holding PT: * If the market swings and Implied APY falls, examine the Implied APY to determine which mode the market has morphed into, and execute the relevant strategies. * If all else stays constant, you can hold PT until maturity and redeem the underlying asset, realising the Fixed APY (see Level 2 for fixed yield strategy). ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#equilibrium-mode) **EQUILIBRIUM MODE** When Implied APY is at a reasonable rate, it means that PT and YT prices are both reasonable and the **market is at an equilibrium**. As such, **any of the three strategies (holding PT, holding YT, or holding the underlying asset)** are all potentially sound. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#cheap-yt-mode) **CHEAP YT MODE** When Implied APY is low (undervalued), YT is cheap with a high Long Yield APY, **holding YT tends to be the best strategy.** When holding YT: * If the market swings and Implied APY rises, examine the Implied APY to determine which mode the market has morphed into, and execute the relevant strategies. * If all else stays constant, you can hold YT until maturity and continue collecting the yield of the asset. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#how-to-identify-the-correct-mode) How to identify the correct mode The key to identifying the mode is to judge whether the **current Implied APY is overvalued or undervalued**. > To recap, **Implied APY** is the **average future APY that the market is implying by trading PT and YT at the current prices**. It boils down to predicting the **average future APY**, then comparing your predictions with the **current Implied APY**. In many cases, it is reasonable to approximate the average future APY to the **underlying APY**. However, yield can fluctuate by large amounts in rare cases, and the underlying APY might deviate significantly from the actual average future APY. For example, if a protocol has announced an upcoming APY reduction, the market will likely have priced it in, resulting in a seemingly low Implied Yield and cheap YT. Ultimately, the deciding factor is **your own outlook on the average future APY** that guides your decisions and determines your success in yield trading. circle-info 💡 See also [How can I predict the average future APY?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-can-i-predict-the-average-future-apy) circle-info 💡 Review when to enter/exit a YT position in [Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure)](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#how-it-works-in-practice) How it works in practice Suppose it is 1 Jan 2023, and there is a stETH market on Pendle with a **1-year maturity period (1 Jan 2024)**. **On 1 Jan 2023 (1 year till maturity):** ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252Fe6SlxkIqwSU9ZJPo8EDX%252Fimage.png%3Falt%3Dmedia%26token%3Dd185a9d4-aa57-43a0-b4be-a445d216df74&width=768&dpr=3&quality=100&sign=d239c78b&sv=2) **On 1 April 2023 (9 months till maturity):** ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FAXv9naiWxq8guI3SJCG8%252Fimage.png%3Falt%3Dmedia%26token%3D5737f959-176b-4a59-8435-2a27ef82d45f&width=768&dpr=3&quality=100&sign=b7f015cc&sv=2) **On 1 Oct 2023 (3 months till maturity):** ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F79cVFK1cV17eiLVPoi3Z%252Fimage.png%3Falt%3Dmedia%26token%3D823110d9-b20d-4c9a-89cd-8ecf3e82eeb1&width=768&dpr=3&quality=100&sign=a84abdfa&sv=2) In total, after 9 months, Peepo executed **3 trades** and has **5.301 stETH from a starting principal of 4.3 stETH. This translates into an APY of 32.2%**. Obviously, the more correct trades Peepo executes, the larger his APY. We can also observe that correct YT trades can lead to large profits. Of course, the inverse is also true, that wrong YT trades can lead to large losses. PT trades, on the other hand, will be lower risk, and lower reward as well. circle-exclamation **PRO TIP** On top of Implied APY changes due to overall market conditions, there are Implied APY changes simply due to volatility as people buy and sell PT and YT. You can actively trade these movements and switch between PT / YT much more often, which could give larger profits if you do it right. [PreviousChapter 8 - Long Yield (Obtain Leveraged Yield-Exposure)chevron-left](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) [NextPoints Tradingchevron-right](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading) Last updated 2 years ago * [TLDR](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#tldr) * [The 3 modes of the yield market](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#the-3-modes-of-the-yield-market) * [CHEAP PT MODE](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#cheap-pt-mode) * [EQUILIBRIUM MODE](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#equilibrium-mode) * [CHEAP YT MODE](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#cheap-yt-mode) * [How to identify the correct mode](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#how-to-identify-the-correct-mode) * [How it works in practice](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield#how-it-works-in-practice) sun-brightdesktopmoon sun-brightdesktopmoon --- # Points Trading | Pendle Academy circle-info Facing problems? Head to our [Support](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page) page! Get leveraged points, yields or get the highest fixed yields on Pendle supercharged by points trading! [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#definition) Definition --------------------------------------------------------------------------------------------------------------------- Points trading on Pendle works the same way as yield-trading where: * YT buyers receive underlying floating yields and points * PT buyers receive a fixed yield in exchange for foregoing all floating yields and points * Liquidity Providers receive additional yields from swap fees and Pendle incentives while retaining points exposure (with **Keep YT Mode** enabled) circle-info In other words, underlying points are treated the same way as the underlying yields. This includes 3% YT fees incurred on underlying yields and points. [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#yt) YT ----------------------------------------------------------------------------------------------------- Where to buy YT: [https://app.pendle.finance/pointsarrow-up-right](https://app.pendle.finance/points) **Each YT lets you receive the yield and points of 1 unit of the underlying asset until maturity. (1 ETH, 1 USDC, etc)** circle-exclamation YT is worth **ZERO at maturity** as it no longer generates any yield and points. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FSRwrSLVkouAxCKHqJ1Dn%252Fimage.png%3Falt%3Dmedia%26token%3D52da1c5c-385a-4ee2-8b8c-d8574d96fd1a&width=768&dpr=3&quality=100&sign=c17ea5bf&sv=2) In the image above, 1 ETH enables you to purchase 13.2 YT. In other words, you’re using 1 ETH to purchase 13.2 ETH worth of ezETH yield and points until maturity. Note that positions on Pendle are not locked and **you can sell YT anytime at market rate**. Click on the arrows below the input box to switch the input and output assets. [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#pt) PT ----------------------------------------------------------------------------------------------------- Where to buy PT: [https://app.pendle.finance/pointsarrow-up-right](https://app.pendle.finance/points) **Each PT will be redeemable for 1 unit worth of the underlying asset deposited into the underlying protocol at maturity (e.g. 1 ETH worth of ezETH, 1 USDe worth of sUSDe, 1 DAI worth of sDAI, etc).** circle-info As the final value of PT is known, the difference between its current price and its value at maturity, is PT’s fixed yield. Since PT holders forego all its underlying yields and points to its YT counterpart, PT’s value trades at a discount. At maturity when YT stops accruing yields and points, PT is made whole again, redeemable for the full value of its underlying (1 ETH, 1 USD, etc). ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F8AKScl0TGvHhmkHELMAK%252Fimage.png%3Falt%3Dmedia%26token%3D73c536fd-774a-4453-b83c-72df103310f3&width=768&dpr=3&quality=100&sign=c8caaba4&sv=2) In the image above, 1 ETH enables you to purchase 1.15 PT. In other words, you’re foregoing points for a guaranteed 11.5% return until maturity. At the time of writing, that translates to ~30% APY. Note that positions on Pendle are not locked and **you can sell PT anytime at market rate**. Click on the arrows below the input box to switch the input and output assets. [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#lp) LP ----------------------------------------------------------------------------------------------------- Where to provide liquidity: [https://app.pendle.finance/pointsarrow-up-right](https://app.pendle.finance/points) Liquidity Providers on Pendle retain all points exposure while earning additional yield from Pendle. circle-exclamation **Turn on Keep YT mode to retain the majority of your points exposure**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FQZLB8MUVej4bb5fVOuiR%252Fimage.png%3Falt%3Dmedia%26token%3D6bbc6ecc-bc50-463e-a4f9-7b86f6ee0307&width=768&dpr=3&quality=100&sign=f13f97e2&sv=2) LP position on Pendle consists of PT and a wrapped version of its underlying, e.g. PT-eETH/SY-eETH, PT-USDe/SY-USDe (SY is simply a wrapped version of its underlying to be compatible with Pendle's architecture). If **Keep YT** mode is turned off, your YT position will be sold for a bigger LP position (hence incurring some price impact). This gives more yield but sacrifices points as the PTs in the LP position do not earn points. To retain most of your points exposure, toggle Keep YT Mode to retain your YT position. While YT goes to zero at maturity, its value is offset by PT’s price gain inside the LP position. Note that points are affected by vePENDLE boosts too (i.e. Those that are unboosted might earn slightly less than those that are max boosted). In conclusion: LPs on Pendle retain all yield exposure and points while earning additional yields from swap fees and $PENDLE incentives. For maximum yield and points, boost your yields by locking vePENDLE or use liquid lockers such as Penpie and Equilibria. [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#point-multipliers-on-pendle) Point Multipliers on Pendle ------------------------------------------------------------------------------------------------------------------------------------------------------- Some assets on Pendle earn higher points than simply holding the underlying asset. This multiplier is given by the underlying protocol and is subject to change at any given notice. Refer to [this pagearrow-up-right](https://app.pendle.finance/trade/points) for the list of point-multipliers for the various assets on Pendle. > Holding naked SYs (i.e. SYs that are not in LP) DO NOT earn any Sats. This is to discourage users from simply holding SY without providing any utility while negatively contributing towards the cap. SY in LP positions and YT will continue to earn Sats as per their multipliers. triangle-exclamation The point multipliers are given by the respective protocols. Disputes should be forwarded to the respective teams, not Pendle. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FehwkyjacceZsBjX5ugsh%252Fimage.png%3Falt%3Dmedia%26token%3D2b31310a-faf2-48c3-a964-5dbceada6c80&width=768&dpr=3&quality=100&sign=253e4292&sv=2) In the image above, 1 ETH enables you to purchase 9.3 ETH exposure of yields and points. Coupled with a 2x rsETH multiplier, 1 ETH purchases: * **9.35x** EigenLayer points * **18.7x** Kelp Miles * Yield from 9.35 rsETH [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#faq) FAQ ------------------------------------------------------------------------------------------------------- See [Points Support Page](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page) for the full FAQ. Please read through this page and the support page before asking the team questions. The information in this docs is correct. You do not have to ask the team for confirmation again. Happy yield (and points) trading. ☺️ [PreviousChapter 9 - Identifying Opportunities to Long/Short Yieldchevron-left](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield) [NextPoints Support Pagechevron-right](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page) Last updated 2 months ago * [Definition](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#definition) * [YT](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#yt) * [PT](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#pt) * [LP](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#lp) * [Point Multipliers on Pendle](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#point-multipliers-on-pendle) * [FAQ](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#faq) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 6 - Shorting Yield | Pendle Academy > Course level: **#advanced** circle-info 💡 Review [chapter 2](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) to learn about the basics of what is a **Principal Token** (**PT**). Review [chapter 3](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-3.1-fixed-yield-on-pendle) to learn about buying PT to get fixed-yields. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#tldr) TLDR Recall that you can [split your yield-bearing asset](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) on Pendle into one that represents the principal (PT) and one that represents the yield (YT). You can sell or buy these tokens on the Pendle market to bet on the changes in yield. For example, if you think the yield will go down, you can sell your YT and keep your PT. This way, you can secure a fixed rate of return and avoid losing money if the yield drops. This is called **shorting yield**. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#pt-is-a-short-yield-position) PT is a **short yield position** Buying and holding PT is more than just earning a fixed income. It is also a way to bet against falling yields. When the market expects yield to go down, PT price goes up. PT is therefore also a short-yield position. [Implied APY falls if the market consensus believes the yield of an asset will go down](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) . This drives PT price higher and you can choose to sell your PT to make a profit. This is called active yield trading. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#when-should-you-buy-pt) When should you buy PT? The fixed yield from buying and holding PT **depends on the current market price of PT**. Intuitively, you should **buy PT when it is cheaper,** as you would **get a higher fixed yield**. But how can you tell that PT is selling at a cheap price? You need to **compare the fixed yield** **with the average future yield of the underlying asset**. The average future yield is your own prediction of the future yield from now until maturity. If the fixed yield is higher than your prediction of the average future yield, then it is probably a good time to buy PT. This means you are betting against the market and securing a higher rate of return. For example, if you predict that the average future yield until maturity for stETH is 5%, but PT stETH is priced at a 6% fixed rate, then you should buy and hold PT stETH. circle-exclamation _**PRO TIP**_ **Timing is important** when executing a PT trade. As people buy and sell PT in Pendle, the fixed rate will fluctuate up and down. If you can wait and enter the PT trade right when PT is oversold (due to volatility or mispricing), you will secure a high fixed rate all the way until maturity. Numerically, **Fixed APY = Implied APY**, which shows the market expectation of the future yield. You can therefore also compare the implied APY against the underlying APY within each asset market in the “Market” page. Generally speaking, **PT is cheap when the implied APY is much higher than the underlying APY** (unless you believe the underlying APY is going to bounce back). ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252Fpe0sD8wK03qrgkjeRzGk%252Fimage.png%3Falt%3Dmedia%26token%3Dbf26798c-e410-4638-b1a2-1400d3a8f2a0&width=768&dpr=3&quality=100&sign=132b1d8e&sv=2) In a nutshell, you may consider entering a short yield position by buying PT when… 1. you believe the asset will generate less underlying APY in the future, or 2. you want to hedge against falling yield, or 3. you feel satisfied enough with the advertised APY, or 4. you believe PT is too undervalued ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#how-to-ape) How to Ape 1. **Go to** [**Pendle**arrow-up-right](https://app.pendle.finance/pro/markets) 2. **Buy PT** 1. Select the PT you want to buy. 2. Select input asset (i.e. what you want to use to buy PT). 3. Review the Output and Price Impact of your trade. 4. Approve and confirm the transaction. 3. **Passive Management** - Hold PT and redeem the Underlying Asset upon expiry **Active Trading** - Sell PT when price increases ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#early-selling-of-pts) Early selling of PTs Instead of waiting until maturity to redeem the underlying asset, you can also choose to sell your PT early. The usual motivations for selling PTs include: * Exiting the position to move capital elsewhere, or * PT price has increased significantly and there is an opportunity to take profit early. This is known as Active Yield Trading. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#see-how-it-works-in-practice) See how it works in practice Let's say that there is an stETH pool in Pendle with a maturity of 1 year. That means the holder of **PT stETH is guaranteed to be able to redeem stETH at 1:1** after 1 year. Peepo sees the following information from the Pendle Market page on 01 Jan 2023: ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FkUZmJxtDWaIXq5xpYRG7%252Fimage.png%3Falt%3Dmedia%26token%3D55314741-9ea5-4180-986c-f51b02e9bb85&width=768&dpr=3&quality=100&sign=905065e2&sv=2) **PT stETH = 0.94 stETH** You can pay 0.94 stETH to buy 1 PT stETH now and redeem 1 stETH after maturity **Underlying APY = 5%** Underlying APY means that stETH is currently generating a 5% yield from staking rewards in Lido. Thus holding stETH nets a 5% APY. **Fixed APY = 6.4%** Fixed APY for buying and holding PT until maturity is 6.4% Peepo predicts that the average future yield in Lido will **at best be 6%**, so securing a **6.4% fixed yield** is a good move. Peepo proceeds to purchase **100 PT stETH (= 94 stETH)**. Having purchased **100 PT stETH**, Peepo is guaranteed to be able to **redeem 100 stETH** after the PT matures in 1 year. Effectively this produces a **Fixed APY of 6.4%**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FGFxUOe6zZtY5Fi8ZfuBv%252Fimage.png%3Falt%3Dmedia%26token%3D04776962-a53b-4b92-8e88-7292c46257b4&width=768&dpr=3&quality=100&sign=98743c58&sv=2) Actually, **even if the Fixed APY was slightly lower than the Underlying APY**, it might still be a good deal, especially **if you predict that** **yield will drop in the future**. This is especially useful in turbulent markets when the yield can fluctuate rapidly, as you can **fix your APY at a desirable rate** and not need to worry about your return dropping at all. [PreviousPT / YT / LP Cheatsheetchevron-left](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet) [NextChapter 7 - Providing Liquidity while Trading Yieldchevron-right](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) Last updated 1 year ago * [TLDR](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#tldr) * [PT is a short yield position](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#pt-is-a-short-yield-position) * [When should you buy PT?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#when-should-you-buy-pt) * [How to Ape](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#how-to-ape) * [Early selling of PTs](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#early-selling-of-pts) * [See how it works in practice](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield#see-how-it-works-in-practice) sun-brightdesktopmoon sun-brightdesktopmoon --- # PT / YT / LP Cheatsheet | Pendle Academy [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#what-is-pendle) What is Pendle --------------------------------------------------------------------------------------------------------------------------------------- Pendle lets you earn better yields. We help you secure better certainty and better returns (i.e. higher APY 🔥). 1. Earn fixed yield (with PT) 2. Provide liquidity (LP) to earn extra yield with minimal or zero impermanent loss (IL) 3. Long yield (with YT) ### [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#pt-and-yt-a-quick-round-up) PT & YT — a quick round-up Imagine Pendle being a marketplace where property owners can split and trade their principal (rights to the ownership of the property) and yield (rights to rental payments) separately. You can then sell or trade the yield portion even before maturity. This creates new ways to manage and even speculate on yield. circle-info 💡 Using stETH as an example: **Principal** (Right to Principal of stETH) + **Yield** (Rights to stETH yield) = **Yield-bearing asset** (stETH) #### [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#principal-token-pt) **Principal Token (PT)** * 1 PT lets you redeem 1 unit of the original asset at maturity date. * PT is similar to [zero-coupon bondarrow-up-right](https://www.investopedia.com/terms/z/zero-couponbond.asp) in traditional finance. #### [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#yield-token-yt) Yield **Token (YT)** * 1 YT lets you receive the yield of 1 unit of the original asset until the maturity date, claimable in real-time. * YT is similar to [detached coupons of bondsarrow-up-right](https://www.investopedia.com/terms/c/coupon.asp) in traditional finance. triangle-exclamation **You can sell PT and YT anytime** on Pendle market, with _**no**_ **lock or penalty**, at market price. They are traded 24/7. Perhaps the most important takeaway about PT & YT: circle-check 💡 PT Price + YT Price = Underlying Asset Price * * * [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#pt-cheatsheet-earn-fixed-yield) PT Cheatsheet — Earn fixed yield ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- TL;DR **Earn** **guaranteed amount of your chosen asset** if you hold the position until the maturity date. Yield source PT has [a lower entry cost compared to underlying asset](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) , its value grows over time and becomes 1:1 redeemable to the original asset at maturity date. Your realised discount becomes your fixed yield. Volatility Low Investment profile Long term Beginners friendly Guaranteed Both capital and return are guaranteed, if you hold until maturity Underlying asset yield outlook Bearish Price changes Price rises _in the short term_ with… 1. time 2. Falling [implied APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) 3. Rising underlying asset price (and vice versa) Note that PT is always 1:1 redeemable to underlying asset at maturity date. Valuation PT is cheap when [_Implied APY_](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) is much higher than the [_Underlying APY_](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#underlying-apy) Time to enter 1. If you believe the asset will generate less APY in the future, 2. If you want to hedge against falling yields, 3. If you feel satisfied enough with the advertised APY, 4. If you believe PT is too undervalued Early exit **Anytime**, there’s **no lock or penalty**. PT always has a market price in Pendle’s AMM. Capital efficiency No leverage by itself. However, there are lending platforms that allow you to deposit PTs as collateral to borrow assets, or even loop-leveraging. Other comments PT can be a viable alternative to spot, with similar risk exposure, and the benefit of downside cushion thanks to the fixed yield realized upon redemption. PT can also be a [short-yield strategy](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) , you may profit in short-term if underlying yield goes down. chevron-rightCan I profit if I early exit my PT?[hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#can-i-profit-if-i-early-exit-my-pt) When you exit early, your earnings will depend on the PT’s market price at exit. You may earn higher or lower (in extreme cases, at a loss) than the advertised APY at entry. Note that, however, PT is always 1:1 redeemable to the underlying asset at the maturity date, you do not necessarily need to sell under unfavorable short-term price moves. [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#yt-cheatsheet-increase-yield-exposure-long-yield) YT Cheatsheet — Increase yield exposure (Long yield) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- TL;DR **Increase your yield exposure (long yield)**. Either hold it until maturity, or buy low and sell high to turn a quick profit. You profit when either or both… 1. the price of YT rises, 2. the yield produced by the YT becomes bigger than your cost buying the YT Yield source YT [receives all yield produced by the underlying asset](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) until maturity date, claimable in real time. Volatility Higher Investment profile Short or Long term Intermediate to Advanced investors Guaranteed N/A Underlying asset yield outlook Bullish Price changes Price rises with… 1. Rising [implied APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) 2. Rising underlying asset price 3. Rising yield/reward token asset price (if applicable to that asset) (and vice versa) Note that **time** works _against_ YT — YT price gradually falls over time to zero at maturity. Valuation YT is cheap when [_Implied APY_](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#implied-apy) is much lower than the [_Underlying APY_](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#underlying-apy) Time to enter 1. If you believe the asset will generate more APY in the future, 2. If you want to hedge against rising yield, 3. If you want to speculate on short-term rise of yield % or yield token prices 4. If you believe YT is too undervalued Early exit **Anytime**, there’s **no lock or penalty**. YT always has a market price in Pendle’s AMM. Capital efficiency Since [YT is much cheaper than the underlying asset](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) , you _effectively_ get a **leveraged yield exposure** (typically 20x or more), with no actual borrowing involved. So there’s **no liquidation or oracle error risks**. [hashtag](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#lp-cheatsheet-earn-passive-extra-yields-providing-liquidity) LP Cheatsheet — Earn passive extra yields providing liquidity ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- TL;DR **Earn extra “free” yields on top of your otherwise idle yield-bearing assets.** A Pendle pool is denominated in your selected underlying asset _only_ (PT + SY) (SY = wrapped underlying asset). There’s also **no impermanent-loss (IL) concern at maturity**. Yield source Multiple avenues: 1. Native yields — asset’s underlying yield + PT’s fixed yield 2. Swap fees 3. $PENDLE incentives Volatility Low IL is minimal (pool consists of highly correlated tokens only) before maturity date. No IL at maturity date because PT in the pool will become 1:1 redeemable to underlying asset. Investment profile Short or Long term Beginners friendly Guaranteed APY not guaranteed but capital is guaranteed if you hold until maturity Underlying asset yield outlook Slightly bearish, due to some presence of PT in the pool Price changes Short term price change behavior is similar to PT due to some presence of PT in the pool. Note that the PT in the pool is always 1:1 redeemable to underlying asset at maturity date. Time to enter Anytime. Timing or underlying yield outlook aren’t very important. When implied APY is low, it is more favorable to enter with the “**Keep YT** Mode” enabled, and vice versa. Early exit **Anytime**, there’s **no lock or penalty**. Your APY is also not affected if you exit early. Comment Can be used to hedge against falling underlying yield due to some presence of PT in the pool. Learn more about using [LP as part of your yield trade](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) . circle-info Learn more on [Chapter 9 - Identifying Opportunities to Long/Short Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield) [PreviousOptimizing Yields with Pendle - Key Takeawayschevron-left](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/optimizing-yields-with-pendle-key-takeaways) [NextChapter 6 - Shorting Yieldchevron-right](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-6-shorting-yield) Last updated 2 months ago * [What is Pendle](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#what-is-pendle) * [PT & YT — a quick round-up](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#pt-and-yt-a-quick-round-up) * [PT Cheatsheet — Earn fixed yield](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#pt-cheatsheet-earn-fixed-yield) * [YT Cheatsheet — Increase yield exposure (Long yield)](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#yt-cheatsheet-increase-yield-exposure-long-yield) * [LP Cheatsheet — Earn passive extra yields providing liquidity](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet#lp-cheatsheet-earn-passive-extra-yields-providing-liquidity) sun-brightdesktopmoon sun-brightdesktopmoon --- # Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure) | Pendle Academy > Course level: **#advanced** ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#tldr) TLDR **Yield Tokens (YT)** are traded on the Pendle AMM in the same pool as Principal Tokens (PT). ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FF5piDuJIbBP39MiXBvo7%252Fimage.png%3Falt%3Dmedia%26token%3D2f5c2558-97ca-405b-94c1-8b46f23ef633&width=768&dpr=3&quality=100&sign=7c88e11d&sv=2) Let's say **1 YT stETH** is trading at **0.04 stETH**, with a **maturity in 1 year**. Holding **1 YT stETH** gives you the **right to receive the yield on 1 stETH until maturity**. Peepo thinks that **1 stETH will generate more than 0.04 stETH yield in 1 year** (equivalent to 4% APY), and chooses to **buy 1 YT stETH**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F5FRhGRbr7TUIfOyh2VpB%252Fimage.png%3Falt%3Dmedia%26token%3Dcea0a104-008a-4b8c-9f89-82a578d9ba38&width=768&dpr=3&quality=100&sign=eab0cc53&sv=2) Here, **Peepo profits** as the future yield that he **accrued is greater than the price of YT stETH when he purchased it**. Peepo was basically **longing stETH yield**: circle-info 💡 **Buying and holding YT = longing yield Profits = Future yield - YT cost** ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-to-ape) How to Ape 1. **Go to** [**Pendle**arrow-up-right](https://app.pendle.finance/pro/markets) 2. **Buy YT** 1. Select the YT you want to buy. 2. Select input asset (i.e. what you want to use to buy YT) 3. Review the Output and Price Impact of your trade. 4. Approve and confirm the transaction 3. **Passive Management** - Hold YT and collect all the yields until expiry **Active Trading** - Sell YT when Implied APY increases 4. **Redeem YT yields** from the [Pendle Dashboardarrow-up-right](https://app.pendle.finance/trade/dashboard/overview/positions) ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-do-i-become-profitable) How do I become _profitable_? You profit when either or both… 1. the price of YT rises 2. the yield produced by the YT becomes bigger than your cost buying the YT Generally speaking, you are betting that either or both… 1. the **implied APY** rises after you buy (which pumps the YT price), implied APY is driven by **market force** (supply & demand of YT and PT) 2. the **underlying APY** and/or the **long yield APY** becomes higher (which means yield is being produced faster) Here’s a table that quickly summarises what is going in favor or against you as a YT holder. Just flip the arrows’ directions if the indicators go the other way around. Indicators👇 / Effect 👉 YT Price YT Yield Receivables Underlying asset price ⤴️ ⬆️ ┄ Implied APY ⤴️ ⬆️ ┄ Underlying APY ⤴️ ┄ ⬆️ Long Yield APY ⤴️ ┄ ⬆️ Time to maturity ⤵️ ⬇️ (slowly) ┄ ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#leveraged-yield-exposure-and-nominal-value) Leveraged yield exposure & nominal value Since YT is typically much cheaper than the underlying asset, you _effectively_ get **leveraged yield exposure** by buying YT. For example, in the image below, you can earn the yield of ~11.9 stETH with just the cost of 1 stETH, which is an 11.9x effective leverage in _**notional value traded**_. There’s **no borrowing involved**, so there’s **no risk of liquidation or oracle errors**. The leverage is simply achieved by [Yield Tokenisation](https://pendle.gitbook.io/pendle-academy/pendle-101/chapter-2-yield-tokenization-basics) , which lets you buy only the yield portion of the asset for a small fraction of the original price. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FCbja3BXpNPpLDb2khRLC%252Fimage.png%3Falt%3Dmedia%26token%3D4478d085-751a-4c8a-9382-a65f0d060cbe&width=768&dpr=3&quality=100&sign=614a4436&sv=2) With the cost of 1 stETH, you are buying yield exposure of 11.9 ETH worth of stETH. An 11.9x leverage in notional value in this case. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#when-should-i-long-yield-and-buy-yt) When should I long yield and buy YT? The last statement in the TLDR section can be condensed into a formula: ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FNxuFL7QFbGqf1e4WfpdV%252Fimage.png%3Falt%3Dmedia%26token%3Df5e52331-09cb-4abf-95fd-8f9a967365ae&width=768&dpr=3&quality=100&sign=cdf9b306&sv=2) _The best way to frame yield trading is to think in APY terms, instead of dollar values._ If you think the **average future APY** will be higher than the **current Implied APY** (the APY that the market is implying), then **longing yield is a sound strategy**. One simple estimate of the **average future APY** is the **current underlying APY**, which is the APY being generated **in the underlying protocol**. If all the conditions stay exactly the same from now until maturity, **the future APY should be the same as the underlying APY**. **If you assume** that the **current underlying APY** is a good estimate of **future APY**, these are simple guidelines to see when is a good time to purchase YT: circle-info 💡 If **Implied APY is low compared to Underlying APY**, then you are **more likely to profit** from buying YT. circle-info 💡 If **Implied APY is high compared to Underlying APY**, then you are **less likely to profit** from buying YT. ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-to-manage-my-trade) How to manage my trade? **Passive Management - Buy and hold YT when Implied APY is low** YT is cheap when Implied APY is low relative to the Underlying APY. As long as the Underlying APY stays above the Implied APY you bought YT at, you will likely profit from this trade. > Profit = Total Yield Collected from YT - Cost of YT **Active Trading - Sell YT when Implied APY is high** YT can be sold anytime. Just like any other tokens, you can also profit from “buying low, selling high” with YT. You can profit by monitoring the Implied APY, and selling off your YT when Implied APY increases. > Profit = (Total Yield Collected + Revenue from YT Sale) - Cost of YT ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FUVsAlevKswV3ZT5Mvwj2%252Fimage.png%3Falt%3Dmedia%26token%3D5fbaa1c8-a789-434a-a5f6-5198ab828d58&width=768&dpr=3&quality=100&sign=7aa334cd&sv=2) Implied APY Charts in the Pendle App ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-can-i-predict-the-average-future-apy) How can I predict the average future APY? The simple guidelines in the previous section have a **big assumption** that the **underlying APY will stay the same**. Of course, reality is not so simple and this **usually is not the case**. Many other factors can influence the future yield, such as **market sentiment** or **changes to the yield-generating mechanism of the underlying protocol**. For example, in a bull market, there is a high demand for money, resulting in a higher rate of borrowing in money markets. This demand will translate to higher borrowing APY, and thus higher APY for lenders. Any edge in identifying and analyzing these trends will go a long way in predicting future yield and executing this strategy. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FH15aInsn42MQfOy3w1wR%252Fimage.png%3Falt%3Dmedia%26token%3Dcc3f3d08-fe4b-42d8-94f0-1703cb12fecb&width=768&dpr=3&quality=100&sign=3953ee35&sv=2) As another hypothetical example, GMX could be close to successfully partnering up with Google and Amazon, providing a catalyst for GLP yield to skyrocket in the future due to increases in user activities, interests, and ultimately swap fees, rewards, etc. So, just because YT is relatively expensive doesn’t necessarily mean that it’s overvalued. In this case, it might be a good idea to purchase YT now ahead of time. Another way to evaluate the value of Implied APY is by analyzing its historical trend on Pendle. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FooTKpVTvg8AjbYHnfaDP%252Fimage.png%3Falt%3Dmedia%26token%3D8af26eb0-2a94-4c9f-895d-119b1796b07d&width=768&dpr=3&quality=100&sign=2d58ca83&sv=2) ### [hashtag](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-does-it-work) How does it work? Let's say that there is a **stETH pool** in Pendle with a **maturity of 1 year.** That means the holder of **YT stETH** has the right to collect **stETH yield for the next 1 year**. Peepo sees the following information from the Pendle Market page on 01 Jan 2023: ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FNUHWHtGBQPgHZyv9Fx0T%252Fimage.png%3Falt%3Dmedia%26token%3D2ad4d083-aa16-478b-b0c2-5d03c35763cc&width=768&dpr=3&quality=100&sign=da7d43f0&sv=2) **YT stETH = 0.04 stETHImplied APY = 4.2%** By trading YT stETH at this price, the market is valuing the average future APY of stETH to be 4.2% in the next year. **Underlying APY = 5%** Underlying APY means that stETH is currently generating a 5% yield from staking rewards in Lido. Thus holding stETH nets a 5% APY. **Long Yield APY = 25%** APY for buying and holding YT at the current price, assuming the average future APY is equivalent to the current underlying APY. Peepo predicts that the average future APY of stETH will **remain above 5%**, meaning that the **current Implied APY of 4.2% is a bargain**. Peepo chooses to **buy 100 YT stETH (= 4 stETH),** knowing that if the average future APY remains at the current underlying APY (which is a possible assumption), **he will receive 5 stETH worth of yield, netting a 25% APY**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FUfcYk854nOCz9xxHDyKK%252Fimage.png%3Falt%3Dmedia%26token%3D68e6e969-ddf9-422e-a28d-fe94517d9792&width=768&dpr=3&quality=100&sign=d738df1b&sv=2) It turns out that the average APY increases to **5.5%** within the next year, **Peepo ends up receiving an even greater yield**. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252F7bsTWTQGO2bWCCb6iGES%252Fimage.png%3Falt%3Dmedia%26token%3D3e429a37-472b-4a7e-b4f0-810472d8bc09&width=768&dpr=3&quality=100&sign=c9579dfe&sv=2) Compared to **simply holding stETH**, which would receive the **displayed 5.5% APY**, Peepo receives **more than 6x** of that APY by holding **YT stETH** instead. * * * **Wojak bought 4 stETH** ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FyCoJIcoIVt9sEmJRDSkP%252Fimage.png%3Falt%3Dmedia%26token%3D577b2530-fee6-4b20-9a58-9af0b5756b2e&width=300&dpr=3&quality=100&sign=380abe88&sv=2) By holding **4 stETH** for 1 year, Wojak earned **5.5% APY = 0.22 stETH** * * * **Peepo bought 100 YT stETH (=4 stETH)** ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FCFnMCXc08RIwEytSU3WE%252Fimage.png%3Falt%3Dmedia%26token%3D808f4d3c-e966-4f53-91cf-d4eda112d1e8&width=300&dpr=3&quality=100&sign=a0c455f&sv=2) By holding **100 YT stETH** for 1 year, Peepo earned **1.5 stETH**. Peepo receives **more than 6x** of that APY by holding stETH instead. * * * However, it is important to note that, as with most investments, higher rewards comes with higher risks. When **Implied Yield is much greater than Underlying APY**, then the **Long Yield APY will be negative**. This means that assuming the underlying APY remains constant, the cost of buying YT would be more than the average future yield collected. Under such scenario, it is generally **not a good time to buy YT**, unless you believe that the underlying APY will rise above the current implied APY. Even when you buy YT at a **positive Long Yield APY** when **Implied APY < Underlying APY**, the average future APY could **drop lower than the Implied APY** of your trade and you will have a loss (look at the equation in section 3.1 again). Ultimately, you are entering a **long-yield** position and your profit depends on **yield sustaining or increasing**. [PreviousChapter 7 - Providing Liquidity while Trading Yieldchevron-left](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) [NextChapter 9 - Identifying Opportunities to Long/Short Yieldchevron-right](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-9-identifying-opportunities-to-long-short-yield) Last updated 1 year ago * [TLDR](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#tldr) * [How to Ape](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-to-ape) * [How do I become profitable?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-do-i-become-profitable) * [Leveraged yield exposure & nominal value](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#leveraged-yield-exposure-and-nominal-value) * [When should I long yield and buy YT?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#when-should-i-long-yield-and-buy-yt) * [How to manage my trade?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-to-manage-my-trade) * [How can I predict the average future APY?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-can-i-predict-the-average-future-apy) * [How does it work?](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure#how-does-it-work) sun-brightdesktopmoon sun-brightdesktopmoon --- # Points Support Page | Pendle Academy [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#self-service) Self-service --------------------------------------------------------------------------------------------------------------------------------------------- [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#yt-pt-lp) **YT / PT / LP** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#risks) **Risks** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#balance-is-down) **Balance is Down** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#points-related) **Points Related** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#zero-price-impact-lp) **Keep YT Mode LP** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#lrt-on-arbitrum) **LRT on Arbitrum** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#usde-cap) **Capped Assets** [](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#others) **Others** [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#faq) FAQ --------------------------------------------------------------------------------------------------------------------------- ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#yt-pt-lp) YT / PT / LP #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-are-the-differences-between-yt-pt-and-lp) 1\. What are the differences between YT, PT and LP? Pendle splits a yield-bearing asset (eETH, stETH, GLP, etc) into 2 parts, **YT** (Yield Token) and **PT** (Principal Token). These 2 components can be traded on Pendle and trading is facilitated by **LP**s (Liquidity Providers). YT and PT are the 2 fundamental concepts in Pendle. To learn more about them in LRT's context, check out [Definition](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading#definition) . #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-can-i-swap-between-pt-and-yt) 2\. Can I swap between PT and YT? Yes. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-why-does-yt-have-a-negative-long-yield-apy) 3\. Why does YT have a negative long-yield APY? The negative long-yield APY is because you are paying more vs what you're getting in yield. But note that in LRT's case, YT receives points, which have unknown values (Pendle assumes 0 value for points). Since YT’s cost is higher than the estimated yield-receivables from the current underlying APY, long-yield APY is displaying a negative value. Check out [Long Yield APY](https://pendle.gitbook.io/pendle-academy/optimizing-yields-with-pendle/chapter-5-important-concepts-in-yield-trading#long-yield-apy) to learn more about long-yield APY. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-4.-do-i-have-to-hold-until-maturity) 4\. Do I have to hold until maturity? No. But see [Risks](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#risks) , might be relevant for you. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-5.-does-1-pt-weeth-redeem-1-weeth-or-1-eeth-at-maturity) 5\. Does 1 PT-weETH redeem 1 weETH or 1 eETH at maturity? 1 PT-weETH represents the principal of 1 eETH (which is pegged to ETH). So at maturity, 1 PT-weETH redeems 1 eETH, but is given in weETH (whatever the exchange rate between weETH and eETH is then). One way to easily visualize it is that **1 PT-LRT will be redeemable for 1 ETH** at maturity, given in its yield-bearing form (weETH, rsETH, ezETH, etc). #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-6.-what-exactly-does-1-pt-yt-represent) 6\. What exactly does 1 PT / YT represent? It might differ by assets, refer to the asset description in the app (above its price chart) for its exact representation. See below for an example with Ethena's sUSDe. ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FjVA3UCFRQhW4aj7kG4ck%252Fimage.png%3Falt%3Dmedia%26token%3Dd858acb4-f5cb-4bd2-826a-f4dfd45ccd29&width=768&dpr=3&quality=100&sign=97d93b9&sv=2) ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#risks) Risks #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-are-the-risks) 1\. What are the risks? **Smart contract risks are to be expected in any DeFi protocol.** **YT**: The value of the received points and yield might not offset the cost you paid to buy YT. **PT**: Holding to maturity has no price risk, where you will be able to redeem for the full underlying asset. Exiting before maturity may expose you to price risk (i.e. YT and PT's implied yield fluctuates, which may lead to a difference in value when exiting your position). However, you are still exposed to underlying price risk, i.e. underlying depegs, extreme price movements, etc. **LP**: Holding to maturity has no price risk, where you will be able to redeem for the full underlying asset. Exiting before maturity may expose you to price risk (i.e. YT and PT's implied yield fluctuates, which may lead to a difference in value when exiting your position). However, you are still exposed to underlying price risk, i.e. underlying depegs, extreme price movements, etc. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-what-happens-if-eigenlayer-or-the-lrt-projects-stops-distributing-points) 2\. What happens if EigenLayer (or the LRT projects) stops distributing points? Pendle still functions as normal. In a nutshell, Pendle streams the points and yields to YT holders. If the underlying projects stop distributing points, YT holders (and LPs) stop earning points too. In a rational market, we would expect: * YT's value to decline as it is now worth less (no more points to receive). * PT's value to rise, as YT's value declines (note that PT+YT = underlying) #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-are-points-guaranteed-to-translate-to-airdrops) 3\. Are Points guaranteed to translate to airdrops? No. It depends on the underlying protocols to decide what to grant the points for. Pendle is simply a tool to manage your points exposure. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#balance-is-down) Balance is down #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-my-yt-balance-is-down-what-is-going-on) 1\. My YT balance is down, what is going on? That means YT's price is down. See [1\. What are the risks?](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-are-the-risks) for a list of risks. YT's price fluctuates based on market valuation. YT's value is derived from its yields and points receivables. If the market thinks its future yields and points are worth more than what YT is trading at, YT should see demand, driving its price up, and vice-versa. That said, YT price naturally declines to zero at maturity while it earns yields and points from the underlying LRT. Because the $ value of points is unknown, Pendle assumes 0 value, hence your YT PnL will be deep in the negatives in the Pendle dashboard. Learn more at [3\. Why does YT have a negative long-yield APY?](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-why-does-yt-have-a-negative-long-yield-apy) #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-my-pt-balance-is-down-what-is-going-on) 2\. My PT balance is down, what is going on? That means PT's price is down. See [1\. What are the risks?](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-are-the-risks) for a list of risks. PT's price fluctuates based on market valuation. **However, at maturity PTs will be worth its guaranteed value**. This means that over time, each PT will appreciate toward that value, with some fluctuations in between. PT price gain is guaranteed at maturity, barring any smart contract risk. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-my-lp-balance-is-down-what-is-going-on) 3\. My LP balance is down, what is going on? First of all, DYOR, you should know what you're providing liquidity for. Learn more about liquidity provision at [Chapter 7 - Providing Liquidity while Trading Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) . In short, liquidity provision is done in SY and PT. (e.g SY-eETH and PT-eETH, where SY is simply a wrapped version of the yield-bearing asset to be compatible with Pendle). LP's value can have a temporary decline because of impermanent loss (IL), but there will be no IL at maturity. How? If PT's value declines, LP's balance declines alongside it as well as it comprises of partly PT. But note that PT's final value is known as it is a fixed yield position (See [here](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#yt-pt-lp) and [here](https://pendle.gitbook.io/pendle-academy/cheatsheet-for-the-impatient/pt-yt-lp-cheatsheet) to learn what PT is). This means **at maturity, there will be NO IL for LPs on Pendle**. There will be short-term fluctuations, but a long enough timeframe should result in a net-positive position. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#points-related) Points Related #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-where-can-i-see-my-points-how-do-i-know-it-is-accruing) 1\. Where can I see my points? How do I know it is accruing? You can track your EigenLayer and native protocol points over at the respective protocol's dashboard. New pool launches might take a while for the respective teams to build the dashboard. Please be patient, your points are accruing in the meantime, just not showing in the dashboard at the moment. Any dispute should be done in the respective protocol's channel. Pendle is simply a protocol to trade yields (and points). The points tracking is eventually at the underlying protocol's discretion. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-how-does-pendle-enable-leveraged-points-for-yt) 3\. How does Pendle enable leveraged points for YT? Note that Pendle does NOT give nor generate additional points to enable YT's leverage. Pendle simply streams points from the underlying to YT holders. To learn more, see [here](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading) and [here](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-8-long-yield-obtain-leveraged-yield-exposure) . #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-4.-how-often-do-points-accrue) 4\. How often do points accrue? It varies by protocol, check again after 1 day. For newer markets, it might take a while for the respective teams to build the dashboard. Please be patient, your points are accruing in the meantime, just not showing in the dashboard at the moment. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-5.-my-points-are-not-showing-what-do-i-do) 5\. My points are not showing, what do I do? If you purchased PT, you are not getting points. If you purchased YT or provided liquidity, you ARE earning points. Do give it a while for the respective dashboard to show. For newer markets, it might take a while for the respective teams to build the dashboard. Please be patient. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-6.-do-i-earn-eigenlayer-points-when-i-deposit-my-lrts-on-pendle-on-arbitrum) 6\. Do I earn Eigenlayer points when I deposit my LRTs on Pendle on Arbitrum? Yes. However, it is up to the underlying protocol to continue streaming rewards and points on Arbitrum. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#keep-yt-mode-lp) **Keep YT** Mode - LP #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-is-the-difference-between-when-i-provide-liquidity-with-keep-yt-mode-on-vs-off) 1\. What is the difference between when I provide liquidity with **Keep YT Mode** on vs off? Learn more on how liquidity provision works: [https://docs.pendle.finance/AppGuide/Trade/Guides/Poolarrow-up-right](https://docs.pendle.finance/AppGuide/Trade/Guides/Pool) Without ZPI, you are providing liquidity with 100% of your capital. LPs consist of PT and its underlying (wrapped in [SYarrow-up-right](https://docs.pendle.finance/ProtocolMechanics/YieldTokenization/SY) ). Note that PT does not earn points. With ZPI toggled on, Pendle retains your YT exposure in your LP process. (i.e. YT is not sold for additional LP -> hence no price impact). This results in less yield as you have less position in LP (since some capital is retained in YT). The amount of YTs that is retained in this process is equivalent to the amount of PTs in your LP position. **This means that ZPI mode retains most of your points exposure while earning yields from swap fees and Pendle incentives.** Note that PT's fixed yield is offset by YT's price decay at maturity. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-i-forgot-to-turn-on-zpi-when-i-provide-liquidity-how-do-i-earn-the-full-points-exposure) 2\. I forgot to turn on ZPI when I provide liquidity, how do I earn the full points exposure? See FAQ #4, If you did not turn on ZPI, your YT is sold for more LPs. In this case, the most efficient way to obtain back your points exposure is to **buy more YT**. You can buy an equivalent amount of YT to the PT in your LP position. You can find the LP composition in the Pool page (eETH example: [https://app.pendle.finance/trade/pools/0xf32e58f92e60f4b0a37a69b95d642a471365eae8/zap/in?chain=ethereumarrow-up-right](https://app.pendle.finance/trade/pools/0xf32e58f92e60f4b0a37a69b95d642a471365eae8/zap/in?chain=ethereum) ) ![](https://pendle.gitbook.io/pendle-academy/~gitbook/image?url=https%3A%2F%2F730168028-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FlZkqEQ5G9jiBga20GYk6%252Fuploads%252FqvkimZT4DUQE4qV9mIzc%252Fimage.png%3Falt%3Dmedia%26token%3D20f9200d-e514-4439-a35b-28fab49060a7&width=768&dpr=3&quality=100&sign=1dbb67ec&sv=2) With basic math, you can calculate the amount of PT in your LP holdings and purchase an equivalent amount of YT to regain full points exposure. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-this-is-all-so-confusing-where-can-i-learn-more) 3\. This is all so confusing! Where can I learn more? Check out [Chapter 7 - Providing Liquidity while Trading Yield](https://pendle.gitbook.io/pendle-academy/yield-trading-deep-dives/chapter-7-providing-liquidity-while-trading-yield) for all you need to know about liquidity provision. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#lrt-on-arbitrum) LRT on Arbitrum #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-how-do-i-bridge-lrts-to-arbitrum) 1\. How do I bridge LRTs to Arbitrum? triangle-exclamation Only use the bridges for the respective assets **Bridging weETH:** Use Arbitrum's native bridge ([https://bridge.arbitrum.io/arrow-up-right](https://bridge.arbitrum.io/) ) to bridge weETH from Ethereum to Arbitrum. _ONLY BRIDGE weETH, NOT eETH. Wrap your eETH to weETH at_ [_https://app.ether.fi/eeth/wrap_arrow-up-right](https://app.ether.fi/eeth/wrap) **Bridging rsETH:** Use Kelp's bridge, powered by LayerZero ([https://bridge.kelpdao.xyz/arrow-up-right](https://bridge.kelpdao.xyz/) ) to bridge rsETH from Ethereum to Arbitrum. _If you used the native Arbitrum bridge, you have to bridge it back to Ethereum, which takes 7 days._ Bridging ezETH: Use connext ([https://bridge.connext.network/EZETH-from-ethereum-to-arbitrum?symbol=ezETHarrow-up-right](https://bridge.connext.network/EZETH-from-ethereum-to-arbitrum?symbol=ezETH) ) to bridge ezETH from Ethereum to Arbitrum. _If you used the native Arbitrum bridge, you have to bridge it back to Ethereum, which takes 7 days._ #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-do-i-earn-eigenlayer-points-on-arbitrum) 2\. Do I earn EigenLayer points on Arbitrum? Yes. If the underlying LRT gives points on Ethereum, it will behave the same way on Arbitrum. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#capped-assets) Capped Assets #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-what-happens-if-the-asset-reaches-cap-on-pendle) 1\. What happens if the asset reaches cap on Pendle? You will not be able to purchase YT/PT/LP with assets from outside of Pendle. You can still exit YT/PT/LP position into other assets but re-entering will not be possible if the cap fills after you exit. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-why-are-some-assets-capped-on-pendle) 2\. Why are some assets capped on Pendle? The caps are enforced by the underlying protocols. * * * ### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#others) Others #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-1.-do-i-have-to-stake-anything) 1\. Do I have to stake anything? No. If you're holding YT, PT, or provided liquidity, you will receive whatever the assets give you without the need to stake anything. #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-2.-my-question-is-not-answered-here-what-do-i-do) 2\. My question is not answered here, what do I do? Use the search function Pendle's discord. Your questions have very likely been asked and answered before. If not, we appreciate questions from a new angle! #### [hashtag](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#id-3.-is-ether.fi-renzo-affected-by-eigenlayer-caps) 3\. Is Ether.fi / Renzo affected by EigenLayer caps? No, ezETH & eETH are natively restaked, there are no caps. [PreviousPoints Tradingchevron-left](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading) [NextWithdrawals / Deposits from Other Chainschevron-right](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/withdrawals-deposits-from-other-chains) Last updated 2 months ago * [Self-service](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#self-service) * [FAQ](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#faq) * [YT / PT / LP](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#yt-pt-lp) * [Risks](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#risks) * [Balance is down](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#balance-is-down) * [Points Related](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#points-related) * [Keep YT Mode - LP](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#keep-yt-mode-lp) * [LRT on Arbitrum](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#lrt-on-arbitrum) * [Capped Assets](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#capped-assets) * [Others](https://pendle.gitbook.io/pendle-academy/ecosystem-and-resources/points-trading/points-support-page#others) sun-brightdesktopmoon sun-brightdesktopmoon ---