This product allows liquidity providers to hedge their downside risk of the LP value falling below a determined price level while generating yield from trading fees within a specific range. By acquiring a set of options, the buyer of this product forfeits the upside potential of the LP in exchange for the downside hedge. The payoff is defined by the cost/premium of the option plus the accrued yield generated until maturity.
Impermanent loss-hedged LP positions can be opened (and generate returns) in USDC, ETH, or BTC, depending on the client’s preference.
The Impermanent loss-hedged LP product is market-neutral while the price remains in the specified range and assumes either a bullish or a bearish bias when the price exceeds the boundaries. In the bullish contract, the client can face losses on the notional amount, if the price goes below the lower bound. Alternatively, in the case of a bearish contract, notional can be negatively impacted, if the price goes above the higher bound.
The existing contract can be extended (re-rolled) weekly by recalibrating the product boundaries and bias. Product re-roll will change the APR due to changes in market volatility, updated product maturity, and new boundaries.
A client is provided with a trade monitoring dashboard that marks-to-market positions and accrued coupons daily. MEV Capital’s digital asset managers are available on demand via private communication channels set up with the client.