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Hedging staked AXS with Float Capital

· 5 min read
float axis infinity

So, you’re an Axie Infinity expert.

You’ve played the game, earned your SLP, swapped it for AXS, and now you’ve got that AXS staked in Axie Infinity to earn dank rewards.

That’s an awesome strategy. But, there is one major risk to consider – price exposure. .

AXS staking rewards are paid in more AXS. Normally more AXS is a good thing, but if the price drops while you’re staking, then your stake and all the rewards earned will lose value.

There’s an easy way of reducing this risk though – going delta neutral.

Delta neutral trading strategies remove the risk of market exposure. They make sure that every point of long exposure in a trading strategy is counterbalanced by equivalent short exposure.

That means that if the price to which the positions are exposed goes up, the long position increases in value and the short decreases proportionally. When the price goes down, the short increases in value, and the long decreases proportionally.

By going delta neutral in Float Capital’s AXS market, you’re free to mine AXS rewards AND alphaFLT rewards without worrying about unfavourable price action.

Here’s how you can get started with a delta neutral AXS strategy:

Staking AXS#

Skip this if you’re an Axie expert and have a pile of AXS staked already.

To stake AXS you need a Ronin wallet.

You can create one easily. Download the app here.

Make sure to back up your private key and password somewhere secure. Sky Mavis recommends adding a hardware wallet as an additional layer of security.

Once your wallet is ready, you need AXS.

There are a few ways to get AXS. The easiest way is to play Axie Infinity. AXS is rewarded within the game, alongside Smooth Love Potion. You can then swap SLP for AXS by using Ronin’s native Katana Dex. Alternatively you can simply bridge USDC or wETH and swap it for AXS.

If you already have AXS, or other assets you want to bridge to Ronin to swap for AXS, use the Ronin bridge.

You can also buy AXS directly on Ronin from Ramp.

Once you have your AXS, head over to the staking dashboard and check out that juicy APY.

float axis infinity

Simply connect your Ronin wallet, select stake AXS, and confirm the transaction. You may need to approve the app the first time.

Once your AXS is staked, you’ll see it reflect on the dashboard, and you’re ready to go delta neutral.

Getting set up on Polygon#

Skip this if you’re a Polygon native and have bags on the chain already.

Once you have an AXS stake, head straight to Float Capital.

To mint a position you’ll need a few things.

You’ll need a wallet supported by the protocol. Currently that’s Metamask, Wallet Connect, or Torus.

Next you’ll need some DAI, to mint a position in the protocol, and some MATIC, to cover gas fees.

You can buy funds directly on Polygon using Ramp. Make sure you buy the assets on Polygon, not on Mainnet or another chain. Alternatively you can buy MATIC on an exchange like Coinbase, and send it across to your wallet.

If you have assets on Mainnet already, then you can easily bridge them across using the Polygon bridge. You can then use a Polygon exchange like Sushiswap, Quickswap or 1inch to swap your asset for the required tokens.

You can also try getting some MATIC from the Polygon faucet, but it doesn’t always work.

Once you have MATIC and DAI, head over to Float Capital and mint your position.

Minting a short in Float Capital#

It’s time to mint a magic internet asset.

Head over to our markets page to see all the markets on offer, or head straight to the AXS market.

To go delta neutral on your staked AXS, you need to mint a short position.

To figure out the size of your position, first check the exposure on the short side of the market.

Based on this you need to calculate how big a position you will need to fully hedge your AXS stake.

Remember, since the market is 2x leveraged, the ‘real’ exposure to price movements will be multiplied by two.

Hence, if the short exposure is 100%, your short position only needs to be half your AXS stake.

If the exposure is less than 100, then the position needs to be bigger than that. To calculate this we’ll use the following:

Your AXS stake = axsStake

The short exposure = shortExposure

The size of your short position = short

Putting that together we get:

short = axsStake / (2 * shortExposure)

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

It’s that easy!

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.

To win a team of Axies, check out our AXS launch announcement.

This piece was written by Denham Preen and Campbell Easton.