Predicting the price of an asset is hard. You're either right, or wrong, there's no room for error at all.
To many, yield trading is this super advanced and abstract concept reserved only for the experts, but the truth you can be wrong, and yet still somehow be right 🧐
To many, yield trading is this super advanced and abstract concept reserved only for the experts, but the truth you can be wrong, and yet still somehow be right 🧐
First off, mastering the art of yield-trading isn't a pipe dream.
The concept is actually very similar to price trading - the goal is to buy YT when the price is low, and sell YT when the price is high.
The concept is actually very similar to price trading - the goal is to buy YT when the price is low, and sell YT when the price is high.
Refresher - YT stands for Yield Tokens, which gives you the right to collect all the yield generated by the underlying asset up till the maturity date.
For example, buying 5 YT-stETH lets you collect all the yield from 5 $stETH up to maturity.
For example, buying 5 YT-stETH lets you collect all the yield from 5 $stETH up to maturity.
Right so yield trading is just the o' classic buy low, sell high.
But how do you know when YT is actually cheap or expensive?
Just like any other regular tokens, YT has a "price" too, which is called Implied APY.
But how do you know when YT is actually cheap or expensive?
Just like any other regular tokens, YT has a "price" too, which is called Implied APY.
And just like prices,
Higher Implied APY = Higher Price
Lower Implied APY = Lower Price
YT is tradeable anytime, so if you buy YT-ankrETH-WETH for 7.05% Implied APY, you can flip it for profit when Implied APY goes up to for instance, 9.31%.
Higher Implied APY = Higher Price
Lower Implied APY = Lower Price
YT is tradeable anytime, so if you buy YT-ankrETH-WETH for 7.05% Implied APY, you can flip it for profit when Implied APY goes up to for instance, 9.31%.
But to gauge if YT is cheap or expensive, Implied APY by itself doesn't tell you anything, not unless you compare it with something called Underlying APY
Underlying APY is the current, actual yield of Aura ankr-WETH in this case.
Underlying APY is the current, actual yield of Aura ankr-WETH in this case.
Underlying APY is also the rate at which your YT will pump out yield for you.
Unlike regular tokens, yield tokens give you an established basis of comparison to make better, informed decisions when trading, in the form of Underlying APY.
Unlike regular tokens, yield tokens give you an established basis of comparison to make better, informed decisions when trading, in the form of Underlying APY.
So you buy YT when you think yield will go up, and sell YT when you think yield will go down, the same concept as token prices.
But even when your prediction is wrong and the Underlying APY ends up going down from 15.9% to 12% for example, you will still be right (profit) 🔥
But even when your prediction is wrong and the Underlying APY ends up going down from 15.9% to 12% for example, you will still be right (profit) 🔥
Even if the price of YT (i.e. Implied APY) goes below your entry price, as long as the Underlying APY stays well above the Implied APY you bought at, you will be in profit by simply holding and collecting all the yield till maturity.
Plus, there are a several data points to help you make the best informed, prediction when it comes to yield.
The APY of Aura pools for instance are predicated upon the amount of incentives directed to them plus the fees collected, and their projections are shown on @AuraFinance
The APY of Aura pools for instance are predicated upon the amount of incentives directed to them plus the fees collected, and their projections are shown on @AuraFinance
For $GLP, the APR is updated every Wednesday and their analytics page shows data such as the amount of fees collected and total Traders PnL per day, all of which contribute to the yield of $GLP
In a way, yield-trading can be more lenient because:
1. You profit as long as Underlying APY stays well above your Implied APY entry, even when Underlying APY and/or Implied APY go down
2. More data points for you to establish informed predictions
1. You profit as long as Underlying APY stays well above your Implied APY entry, even when Underlying APY and/or Implied APY go down
2. More data points for you to establish informed predictions
That said, yield-trading just like price-trading can be volatile and risky, so always DYOR.
For users who prefer a volatility-proof approach, you can opt to buy PT instead to lock in your rates, or simply provide liquidity to earn up to 124% APY with zero IL
For users who prefer a volatility-proof approach, you can opt to buy PT instead to lock in your rates, or simply provide liquidity to earn up to 124% APY with zero IL
Be right when you're wrong. Do more with your assets on Pendle.
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