🎯 JLP Delta Neutral Basis Trade on Drift: Earning 40%+ APY

Hey everyone! Want to share a basis trade strategy I've been looking at running on Drift that's quite interesting with a 40%+ APY while maintaining market-neutral exposure.

The Strategy Overview

This is a delta-neutral basis trade that captures the spread between JLP yields and perpetual funding rates. Here's the setup:

Long Side:

Supply $1,000 of JLP as collateral (currently earning ~15.10% APY)

Short Side (Perpetual Futures):

Short $460 SOL perps (paying -6% funding)
Short $79 ETH perps (flat funding)
Short $128 BTC perps (earning +9.55% funding)

Net Position: $333 of actual capital at risk with 1.67x leverage

The Math Behind It

Income streams:

JLP yield: +$151/year
BTC funding received: +$12.22/year
SOL funding paid: -$27.60/year
ETH funding: $0/year
USDC borrow cost (for underwater positions): ~-$1.78/year

Net APY: ~40% on deployed capital

Why This Works

Delta Neutral: The JLP token represents the liquidity pool composition, so shorting the underlying assets creates a market-neutral position
Positive Carry: JLP yields consistently outpace the funding costs, especially when BTC/ETH funding goes positive
Low Liquidation Risk: Since you're hedged, major market moves don't threaten your position

Risk Considerations

⚠️ Funding Rate Volatility: Rates can flip negative during bull markets, reducing profitability

⚠️ USDC Borrow Costs: When shorts go underwater, you accrue USDC borrows at ~5.33% APY

⚠️ JLP Composition Changes: The pool rebalances can create temporary delta exposure

⚠️ Smart Contract Risk: Both JLP and Drift protocol risks apply

Pro Tips for Execution

Monitor Funding Rates: Adjust position sizes when funding turns deeply negative
Scale In Gradually: Don't deploy full size immediately - wait for favorable funding
Track Your USDC Borrows: Factor in the borrowing costs when calculating true returns
Rebalance Periodically: JLP composition shifts over time, adjust shorts accordingly

Tools & Resources

I built a calculator to model different scenarios - you can play with position sizes, funding rates, and expected unrealized losses to see how they impact net APY.

Key metrics to track:

Total leverage (aim for 1.5-2x)
Net capital at risk
Funding rate trends
USDC utilization rate

Who Is This For?

✅ DeFi users comfortable with perpetuals

✅ Those seeking market-neutral yield

✅ Anyone looking to diversify from directional trades

✅ Yield farmers wanting sustainable APY

❌ Not suitable if you're unfamiliar with perps

❌ Skip if you can't monitor positions regularly

❌ Avoid if you need instant liquidity

Getting Started

Bridge assets to Solana
Deposit into Drift
Mint/buy JLP tokens
Deposit JLP as collateral
Open short perp positions
Monitor and rebalance as needed

Remember: This isn't risk-free money. Basis trades can go negative during extreme funding rate environments. Always size appropriately and never deploy capital you can't afford to have locked up.

Anyone else running similar strategies? Would love to hear your position sizing and how you're managing the funding rate volatility! 🚀

Not financial advice - DYOR and understand the risks before implementing any strategy

Here's the strategy calculator:

https://claude.ai/public/artifacts/d4efede0-d681-4b02-980b-c27f756ab26c

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