Strategy 3｜Delta Neutral Strategy
Last updated
Last updated
Jupiter Perp is one of the most successful product in the year 2024. Currently, the daily trading volume of Jupiter Perp is more than 20 billion. As a result, a large amount of trading fees go to JLP holders, makes JLP the most popular asset in Solana ecosystem. However, due to the unique mechanism of Jupiter Perp, JLP holders, while enjoying the trading fee share, also have to bear the impact of market fluctuations of the tokens in the pool (i.e. BTC, ETH, SOL). If the prices of these three assets fall, the price of JLP will fall as well.
In order to solve this problem and allow JLP holders to enjoy low-risk transaction fee income, NX Finance has launched the first product of Version 2: NX Finance Delta Neural Vault, which hedges JLP exposed positions through perpetual, thereby enabling JLP holders achieve delta free income.
JLP is the core liquidity asset of Jupiter Perp, consisting of a variety of high-quality assets, including SOL, ETH, WBTC, USDT, and USDC.
The returns of JLP are directly reflected in its price appreciation. As the Jupiter Perp platform generates income through trading fees, leverage returns, and other rewards, these earnings are proportionally allocated to the JLP asset pool, thereby increasing the intrinsic value of each JLP token.
Delta Neutral is a strategy designed to help traders achieve low-risk income. For NX Delta Neutral Strategy, our goal is to help users achieving low-risk JLP fee income by hedging exposed positions.
This strategy is designed to provide stable returns through a delta-neutral, leveraged JLP position. First, we will convert the USDC user deposited into JLP, then deposit them on Drift as collateral to establish hedged short positions in SOL, ETH, and BTC, neutralizing the price exposure of JLP. The platform will monitor the positions that need to be hedged in real time. Once the JLP position changes, the hedging position size will be adjusted in time to hedge the JLP exposed position. At the same time, in order to maximize the efficiency of capital utilization, we will also use the existing JLP in the vault as collateral, borrow USDC, convert into JLP to leverage the JLP positions held in the Vault. The short hedging positions of SOL, BTC, ETH will also be increased simultaneously to ensure that the entire position is fully hedged. NX Leveraged Delta Neutral Vault designed a very unique dynamic leverage system which will adjust the leverage amount according to the JLP Yield and the lending&perpetual market situation to maximize the vault yield with 100% safety control.
Breakdown of JLP leveraged delta neutral strategy is stated as below:
Users deposit USDC
Users deposit USDC into the NX Finance delta neutral vault.
Conversion to JLP
NX Finance automatically converts USDC into JLP (liquidity assets consisting of BTC, ETH, SOL, USDC, and USDT) and stakes the JLP on the drift as collateral.
Dynamic Leverage
NX Finance will determine the leverage ratio according to the market condition and loops on the Drift platform to achieve the leverage.
Risk hedging
Since JLP contains assets with high volatility, such as BTC, ETH, and SOL, in order to avoid the risks brought by price fluctuations, the platform will open short orders to hedge JLP risk exposure.
Position monitoring & dynamic adjustment
The platform will establish monitoring of assets in the JLP fund pool and Jupiter Perp long and short position data and dynamically adjust hedging positions and asset distribution according to the market situation to maximize the return while ensuring the safety of the fund.
Outcome
By participating in this strategy, users can achieve stable and continuous returns under lower-risk conditions.
The referral system is one of the innovations for the NX JLP delta neural vault. Referral will enable inviters to earn passive income through inviting others to join the platform. For each successful invite, inviters can earn 5% of the total profit their invitee earned on the platform. For example: Assume that Bob invite Alice to NX Finance, and Alice earns $1000 profit in the vault. According to the distribution rules of the recommendation mechanism, Bob can earn $50 (5% of $1000) as referral reward.
In order to maximize returns while ensuring the safety of user funds, NX Finance launched Dynamic Leverage Yielding. By tracking the real time stats of the lending and perpetual market, the vault will automatically adjust leverage ratio to maximize capital efficiency and the potential return. This approach enables the vault leverage on the yield while maintaining delta-neutral exposure and the safety ratio of the vault.
NX Finance will monitor the real-time data of the Jupiter Perp market in real time, and adjust the leverage ratio and hedging position size in time according to market changes to maximize the user's benefits.
Due to the special mechanism of JLP, there is a price difference between its market price and virtual price, and in extreme cases, it will depeg (for example, on January 20, 2025, a JLP whale sold 2 million worth JLP at once in the market, causing the market price to debeg seriously from its virtual price). NX Finance JLP Delta neutral vault has designed a unique arbitrage mechanism that allows the vault to capture the price difference between these prices during extreme market situations.
A 25% performance fee will be charged on Users' profit in the vault, which 20% of the total fee will be distributed back to users through referral program.
