# GMX Delta Neutral (Alpha test)

## TL;DR

Provide liquidity on GMX (an on-chain leverage trading platform) via $GLP pool to earn yield and neutralize price risk using borrows from AAVE. 

<figure><img src="/files/nMMw9l5vnxKeIOhgUxSG" alt=""><figcaption></figcaption></figure>

## Protocol Integration

1. GMX <https://gmx.io/>
2. AAVE <https://aave.com/>

## Details

### What is GMX/GLP?

GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. Trading is supported by a multi-asset pool ($GLP) that earns liquidity providers fees from market making, swap fees, leverage trading (spreads, funding fees & liquidations) and asset rebalancing.

$GLP is a pool of blue chip tokens used to provide liquidity for trading within GMX. It consists of \~50% of volatile assets ( 30% $ETH + 17% $BTC + $LINK + $UNI ) and \~$50% of stable-coins. Traders trade against the pool and pay platform fees. 70% of the fees is distributed to $GLP holders in form of $ETH/$AVAX and esGMX (see <https://gmxio.gitbook.io/gmx/rewards>). We will only consider the $ETH/$AVAX portion of the yield in our strategy.

<figure><img src="/files/aA6PqwKaUz1iD809nvmb" alt=""><figcaption></figcaption></figure>

### Risks from holding GLP

1. Price exposure on risky assets in the pool (e.g. $BTC, $ETH, etc)
2. Trader's profit and loss (Refer to GMX.io traders PnL section)&#x20;

<figure><img src="/files/4T5u0iFc1biNprVRaI15" alt=""><figcaption></figcaption></figure>

### How does the strategy work?

This strategy aims to achieve market-neutral position by hedging volatile assets in the GLP pool.&#x20;

1. User deposits USDC into strategy vault
2. Strategy splits funds for buying GLP and for delta hedging on AAVE&#x20;
3. Leverage up to 2.5x short on AAVE
4. Target delta-neutral positions comprised of:\
   a. \~80% of deposits in GLP\
   b. Non-stable token shorts matching GLP exposure on AAVE
5. Continuously monitor:\
   a. Loan-to-value on AAVE to avoid liquidation\
   b. GLP non-stable tokens weight change
6. Auto-rebalance on multiple triggers

### Capture up to 80% of GLP APR without price exposure&#x20;

This strategy vault achieves downside protection by trading off 20% upside yield. The vault significantly outperforms simply buy and hold GLP with lower draw-downs and higher return.

<figure><img src="/files/I2hiaQtg1ebrDy6US1MK" alt=""><figcaption></figcaption></figure>

## Fees

We charge a performance and management fee to cover the cost of managing positions and driving growth. Here's the fee scheme:

<table><thead><tr><th width="424" align="center">Fee Type</th><th align="center">Ratio</th></tr></thead><tbody><tr><td align="center">Performance fee</td><td align="center">15%</td></tr><tr><td align="center">Management fee</td><td align="center">2%</td></tr></tbody></table>

## Earn now

1. Go to <https://www.undoxxed.co/>
2. Deposit and Earn


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