What Is Neutral Trade?
Solana DeFi is often introduced through swaps and perpetuals, where you buy a token, sell a token, leverage a long or short trade, and your returns depend on the direction of the price. Neutral Trade is built around a different starting point with the purpose of allocating capital into professional, institutional-grade products, available on-chain. These products are structured to be neutral or directional in nature.
What is Neutral Trade for and how does it work?
Neutral Trade is for you if you want exposure to:
- Structured products offering yield on various assets
- Token baskets and indexes that reduce the risks involved with single assets
- Yield sources derived from quantitative trading strategies
Neutral Trade is a transparent protocol with clear strategies that show sources of return, hedges, and the rebalancing rules that it follows. Information concerning protocol fees, funding and lending is also included in the application.
Strategies on Neutral Trade
Neutral Trade offers a suite of institutional-grade strategies. Some of them are as follows:
JLP Delta Neutral
One of Neutral Trade's market neutral strategies is JLP Delta Neutral. JLP Delta Neutral earns fees from Jupiter’s JLP through trading, borrowing, and liquidations. All these are paid by trader activity on the Jupiter perps DEX. This strategy then continuously hedges JLP’s directional exposures (BTC, ETH, SOL, and Trader PnL), so you no longer have directional exposure to the market going up or down. With the directional exposure hedged, you are still able to earn from JLP's native yield, from the aforementioned trading fees, and from positive market sentiment, the funding rates on the hedging positions. It is important to note that during times of negative funding, these hedging positions can turn from an additional source of yield to a cost.
As shown below, a strategy can comprise multiple vaults, displaying how much has been filled and how much is remaining.
Directional Strategies
CTA-Adaptive Alpha is a directional quantitative strategy that trades crypto futures/perps and tries to make money from short-term market price actions based on on-chain and off-chain data. Directional strategies do not trade by guessing that crypto will go up forever. It switches between two methodologies depending on what the market’s doing: if prices are moving with momentum, it follows the trend, and if it looks stretched, it fades the move, expecting a dump in the market. It can go long or short, and it adjusts as conditions change, so it’s not stuck with one bias.
Private Credit Strategies
In Private Credit strategies, capital is deployed into credit arrangements intended to generate yield from interest, fees or airdrops for depositors. For example, some projects need liquidity for initial bootstrapping. This is what this category caters for.
Yield Enhancement Strategies
From the activity on the Jupiter aggregator, the SOL Super Staking strategy earns yield by capturing trading, borrowing, and liquidation fees from Jupiter Liquidity Provision (JLP). This strategy hedges BTC and ETH exposure while retaining SOL-denominated, directional SOL exposure. Overall returns are primarily determined by JLP yield and funding rates from the BTC & ETH hedges, all while retaining your exposure to SOL.
Index Strategies
The Index strategy is composed of multiple asset baskets that are combined based on specific themes. The share price of tokens in this strategy tracks the basket’s net asset value, and the basket may be rebalanced over time based on the rules set by the curator of the strategy. If the index deploys assets into yield strategies, that yield is then reflected in the share price.
NT Earn
NTl Earn is a savings plan set up for users who want to earn on assets with a low risk profile. As shown below, NT Earn allocates deposited assets into the top lending protocols and diversifies the holdings to get its savings annual percentage yield.
Analytics Dashboard
The Neutral Trade analytics dashboard is available to monitor the current APY and other performance metrics across the strategies in the vaults.
Conclusions
Neutral Trade is moving Solana users from single-asset speculation toward its structured, rules-based products, including quant strategies, indexes, and private credit. With Neutral Trade, users can access and diversify between previously unavailable structured products.
