Yield Trading Strategy
Last updated
Last updated
As we are aware, the yield market constantly fluctuates, including both Fixed Yield and Leveraged Yield. Based on market conditions, you can opt to switch between PT and YT positions to maximize your APY earnings.
For example, on 1st Jan, 2024, there's a pool on Nemo looks like this
Through observation and understanding of the market, Alice thinks that the average underlying APY in the following period will be 5.5%, which is higher than the current 5%. So she chooses to purchase 10,000 YT at a cost of $460.
During these 120 days, with an average underlying APY of 5.1%, Alice received a total of $167.67 in yield. Alongside the value of all her YTs at $380, her total assets amounted to $547.67. The trading profit from the previous transaction was $546.67 - $460 = $86.67, yielding an APY of 57%!
Then, Alice sensed the onset of a bear market (typically characterized by a decline in APY). Anticipating that the underlying APY would drop below 5% in the upcoming period, she decided to sell all her YT and purchase PT to secure the current 5.26% yield. Therefore, she bought 569.3 PT sSUI with all her $547.67.
Alice holds 569.3 PT for another 120 days, and then the market looks like this:
Sure enough, the underlying APY dropped to 4.5%. However, since all of Alice's assets were PT and the price of PT rose to $0.985, her total assets were $560.76. Therefore, the previous transaction brought her a profit of $13.09 up to now, and its APY was 7.27%!
Alice was very satisfied, cleared all her positions, and waited for the next entry opportunity.
In summary, yield trading is a highly effective strategy for capturing additional profits regardless of whether the APY market is bullish or bearish.
If you anticipate a decrease in APY, Buy PT / Sell YT = Short APY.
If you expect APY to rise, Sell PT / Buy YT = Long APY.
Lastly, always remember that every trade involves risks alongside opportunities. If you prefer lower risk, trading PT may be suitable for you. If you are a risk-taker, then trading YT might be more appealing.
