ETH Delta Neutral

Strategy Overview

The ETH Delta Neutral strategy generates yield through funding rates and lending while maintaining a market-neutral position. By going long ETH spot while shorting perpetual futures, the strategy hedges market exposure and captures consistent returns regardless of ETH price movements.

Metric	Value
Current APY	20.2%
Risk Level	Low
Min Deposit	0.1 ETH
Chain	Ethereum
TVL	$14.3K
Depositors	22
Performance Fee	15%
Management Fee	2%

How It Works

Position Structure

1. Long ETH Spot - Purchase and hold ETH on lending protocols (Aave, Compound)

2. Short ETH Perps - Open equal-sized short position on perpetual futures (dYdX, GMX)

3. Result - Net delta of ~0, eliminating price risk

Yield Sources

The strategy generates returns from three primary sources:

1. Funding Rates

Perpetual futures have a funding rate mechanism that balances long/short positions. When funding is positive (longs pay shorts), the strategy earns this rate every 8 hours.

2. Lending APY

The long ETH position is deposited on Aave or Compound, earning lending yield on the collateral.

3. Basis Spread

Occasional arbitrage opportunities arise when spot and futures prices diverge, captured through automated rebalancing.

Risk Analysis

Low Risk Factors

Market Neutrality The long spot + short futures position eliminates directional market risk. Whether ETH goes to $5,000 or $1,000, the net P&L remains stable.

Automated Hedging Smart contracts continuously monitor and rebalance the delta to maintain neutrality within a 0.95-1.05 hedge ratio.

Potential Risks

Liquidation Risk Extreme volatility could cause liquidation on the futures side if collateral ratios fall below thresholds. Mitigated through conservative position sizing.

Funding Rate Flips If funding rates turn negative for extended periods, the strategy may underperform. Historical data shows positive funding ~70% of the time.

Smart Contract Risk Depends on security of Aave, Compound, dYdX, and GMX. All are audited and battle-tested protocols with billions in TVL.

Historical Performance

APY Trends (Weekly)

Date	APY
Oct 29	17.8%
Nov 5	18.9%
Nov 12	19.5%
Nov 19	20.2%

Performance Highlights

• Average APY: 19.1% over last 90 days

• Best Month: 22.3% (October 2024)

• Worst Month: 15.4% (July 2024)

• Consistency: Positive returns in 11 of last 12 months

Protocol Allocation

The strategy deploys capital across multiple protocols for diversification:

Protocol	Allocation	Purpose
Aave	40%	ETH lending for yield
dYdX	35%	Perpetual futures short
GMX	25%	Additional perps exposure

Fees

Performance Fee: 15%

Charged only on profits. If you earn $100 in yield, $15 goes to the protocol and you keep $85.

Management Fee: 2% Annual

Covers operational costs, gas optimization, and ongoing strategy maintenance. Charged pro-rata based on deposit duration.

The displayed APY of 20.2% is net of all fees. You don't need to calculate anything - what you see is what you earn.

Getting Started

Requirements

• Minimum 0.1 ETH deposit

• Phantom or MetaMask wallet

• Small amount of ETH for gas fees (~$5-10)

Deposit Steps

1. Visit the ETH Delta Neutral strategy page

2. Click "Connect Wallet"

3. Enter deposit amount (minimum 0.1 ETH)

4. Review estimated returns and fees

5. Click "Deposit" and approve transaction

6. Your position starts earning immediately!

Quick Start Guide

FAQ

What happens if ETH drops 50%?

The delta-neutral structure protects you. If ETH drops 50%, your long spot position loses 50%, but your short futures position gains 50%, resulting in a net neutral P&L. You continue earning yield from funding rates and lending.

Can I withdraw anytime?

Yes! There are no lock-up periods. Withdrawals typically process within 5-10 minutes as positions are unwound.

How often is the position rebalanced?

The strategy monitors the hedge ratio every block (~12 seconds). Rebalancing triggers automatically if the delta drifts beyond ±5% from neutral.

What if funding rates turn negative?

Negative funding means shorts pay longs. While this reduces returns from funding, you still earn from lending APY and any basis spread opportunities. Historical data shows the strategy remains profitable even during negative funding periods.

Monitor Your Position

Track your investment in real-time:

• View current value (principal + yield)

• Check historical performance charts

• Monitor protocol allocation breakdowns

• Review all transactions and rebalances

https://github.com/NectarFi-xyz/nectarfi/blob/main/gitbook/features/performance-tracking.md

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