# Trading Strategy

### **1. Overview**

Once collateral is received and verified by Deploy’s custodial infrastructure, it is deployed into on-chain delta-neutral strategies that generate yield through funding-rate differentials in perpetual markets.

These strategies are designed to maintain no net market exposure, ensuring principal protection while allowing the protocol to capture stable, market-neutral returns.

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### **2. Strategy Mechanism**

The process can be summarized as follows:

1. **Collateral Deposit**
   * User collateral (USDT) is transferred to an MPC custodian wallet.
   * Custodian allocates a portion of the collateral to designated on-chain trading accounts controlled by Deploy’s strategy managers.
2. **Delta-Neutral Setup**
   * The system opens the below positions:
     * Long in spot markets (holding the underlying asset or synthetic equivalent).
     * Short in perpetual futures markets on decentralized exchanges such as Hyperliquid or GMX.
   * This structure neutralizes price volatility while allowing the strategy to earn the funding-rate yields.
3. **Funding-Rate Capture**
   * When the perp funding rate is positive, short positions receive periodic payments from longs.
   * When the rate is negative, the strategy rebalances or reallocates to other venues to minimize drawdown.
4. **Collateral Rebalancing & Risk Controls**
   * The system maintains strict leverage and margin thresholds.
   * Automated rebalancing adjusts short/long exposure to preserve neutrality.

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### **3. Core Yield Engine**

Deploy’s core engine continuously tracks, analyses, and rebalances strategy allocations using live on-chain and off-chain data feeds:

* **Market Coverage:** Monitors multiple perpetual venues (Hyperliquid, GMX, Drift, Lighter, Aster etc.) across assets such as BTC, HYPE, ETH etc.
* **Yield Optimization:** Dynamically allocates collateral to markets offering the most attractive funding-rate spreads adjusted for liquidity and volatility.
* **Risk Monitoring:** Enforces position size limits, funding-rate sanity checks, and liquidation-margin thresholds.
* **Execution Transparency:** All positions and performance metrics are auditable via on-chain data and periodic custodian reports.

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### **4. Allocation Framework**

| Function             | Description                                                                                                      |
| -------------------- | ---------------------------------------------------------------------------------------------------------------- |
| **Strategy Engine**  | Aggregates market data, evaluates funding-rate trends, and rebalances collateral allocations.                    |
| **Risk Manager**     | Ensures total exposure remains neutral and within protocol-defined limits.                                       |
| **Custodian Bridge** | Executes approved fund transfers from custody wallets to strategy wallets.                                       |
| **Yield Routing**    | Profits realized from strategy PnL are periodically transferred to staking vaults (rebased into the same asset). |


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