KoinlyticsDelta-neutral strategies aim for yield with no exposure to underlying price. If ETH goes to $10k or $500, your PnL depends only on the strategy carrying, not on where ETH went. Well designed, these strategies earn 8-25% APY. Poorly designed, they blow up spectacularly.
The classic: cash-and-carry (basis trade)
Buy 1 ETH spot. Short 1 ETH perp. If perp funding is +0.03% per 8h, you earn ~33% APR just from funding, regardless of ETH price. This is the trade Ethena's USDe scales up.
LST + short
Buy 1 stETH (earning ~3% staking). Short 1 ETH perp. You earn staking yield + funding. If funding is +0.02%/8h and stETH is 3.2% APR, your total is ~5.2% + ~22% = 27% APR. But: LST peg risk during a redemption panic.
Curve LP + hedge
LP into stETH/ETH on Curve. Fees + LDO emissions ~4% APR. Add short ETH to hedge the stETH exposure. Now you have a delta-neutral position earning ~4% + funding.
Where things break
- Funding flip. If perp funding turns negative, you're paying to hold the short. Trade unwinds.
- Margin call. Your short is margined; if ETH rallies 30% before you rebalance, you get liquidated.
- LST depeg. stETH trading at 0.95 ETH during panic makes your "delta-neutral" position deeply negative.
- Exchange failure. Your short lives on Binance/Bybit. If they freeze withdrawals, your hedge is stuck.
Sizing rules
- Never use more than 3x leverage on the short leg.
- Keep 30%+ of collateral as buffer for margin swings.
- Diversify across exchanges (Binance, Bybit, Hyperliquid).
- Monitor funding rate daily; be willing to close.
Who does this well
Ethena has scaled this to $10B+ TVL using multi-venue perp shorts. Their yield is legit but their risk is real: any of the perp venues freezing, sustained negative funding, or an LST depeg would compress it fast.