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Go delta neutral on JOE for dank APR

· 4 min read
float joe

“Have you heard of JOE?”

“Joe who?”

“JOE mama lmao.”

Excerpt from the funniest conversation ever, 2021.

We just shipped a JOE magic internet asset in Float Capital.

Now users can mint a position and get long and short exposure to JOE at 2x leverage.

Or, JOE stakers can come across and go delta neutral. That means opening a short position equivalent to the long exposure of their stake.

By shorting your own stake, you can reduce your price exposure, sit back and mine JOE staking APY, with way less risk. Think of it as JOE farming, with protection from price drops.

The biggest DEX on Avalanche#

Trader Joe is one of the core protocols in the Avalanche ecosystem, facilitating swaps, pools and farms, and most recently lending, through their recent Banker Joe launch.

The DEX is powered by the JOE governance token.

Staked JOE earns a neat ~40% APY in the protocol, which can be tapped for another ~25% APY by lending the XJOE you get through Banker Joe.

It’s an incredible strat, if the user isn’t worried about price exposure.

But with a delta neutral strat, a degen staker can reduce that risk.

Here’s how.

Going delta neutral#

Going delta neutral is a super degen strategy that completely, or partially, removes exposure price movements.

In most cases, when prices only go up, price movements are great.

But in bearish markets, or when big amounts of wealth are involved, delta neutral strats can allow apes to take an element of risk out of their portfolios.

This can be super useful when staking an asset, like JOE, that has tasty rewards for users who can resist unstaking and selling.

So what would a delta neutral JOE position look like?

First, get some JOE. If you’re new to Avalanche, swap some AVAX for it on Trader Joe.

Then, head over to the staking dashboard, and check out that sweet, sweet APR.

float joe

Connect your wallet and select the amount of JOE to stake. Click stake. You’ll need to approve the app, then confirm the transaction.

By staking JOE you’ll swap your tokens for XJOE. The ratio of XJOE to JOE is constantly appreciating, so later you’ll be able to swap your XJOE into more JOE than you originally staked.

For an added layer of degeneracy, you can take your XJOE and lend it out in Banker Joe.

Now comes the delta neutral part. Head across to Float Capital’s JOE market.

You’ll need to open a short position equivalent to the value of your staked JOE. Make sure you have some DAI to mint a position.

There are two variables to take into account when calculating your position.

The first is the market’s leverage: in this case 2x.

The second is the market’s exposure level. This is shown on the market stats at the bottom of the page, on the lower right hand side.

If the short side has 100% exposure, then, because of the 2x leverage, your short will be half the dollar value of your staked JOE. If it’s less than 100%, then we need to do some math.

Remember, the exposure can change based on the balance of capital in the market, so you will need to check this and rebalance periodically.

To calculate your short you’ll need a few variables:

Your JOE stake = joeStake The short exposure = shortExposure The size of your short position = short

Putting that together we get:

short = joeStake / (2 * shortExposure)

Or, you can just make a copy of this Google Sheet and punch in your figures.

Remember to check the exposure level regularly, to make sure that your stake is adequately covered. In the future we’ll be shipping vault contracts which will manage this for you automatically.

Good luck you degen.

This piece is not financial advice. Any kind of DeFi activity comes with risk, and should only be attempted by serious degens who understand this and know how to navigate it.

To learn more about the risks inherent with using Float, read our blog post here.

To understand how the protocol and our magic internet assets work, read our docs.

If you want to meet the team behind Float Capital, claim your gem role, or hang out, come to our Discord.

This piece was written by Campbell Easton.