Delta Neutral GLP Vault Now Hedges Current Weights & Trader OI!
Rage's Delta Neutral Vaults will now hedge both current weights and partial trader open interest (OI), instead of only target weights.
This upgrade reduces the variance in returns from the trader PnL.
How Does the Risk-On Vault Hedge Against Current Weights & Trader OI?
The Risk-On Vault fully hedges the current weights, and partially hedges the trader OI. The traders on GMX can either be net long or short. In both the cases, Rage's short hedge position is calculated as :
Short Hedge Position = TokenCurrentWeights - (traderOIHedgeBps*TokenTraderOI)
- When traders are net long, Rage's hedge position will be less short
- When traders are net short, Rage's hedge position will be more short
It costs less to hedge trader OI when traders are net long due to the hedge position being less short.
Based on ETH & BTC current weights in GLP and its Trader OI, the Risk-On Vault :
- Takes an ETH, BTC Flash Loan on Balancer
- Shorts ETH, BTC on UNI v3, and deposits USDC on Aave
- Adds additional USDC from Risk-Off Vault to Aave (maintaining a Health Factor of 1.5)
- Creates a short position on Aave by borrowing ETH,BTC against the USDC collateral
- Repays borrowed tokens to Balancer
Updated 22 Feb 2023
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