Zap to Long PT
The best of both worlds: hold fixed rate PT and earn LP swap fees!
The strategy in this page is the same as the Zap to Provide Liquidity page, but with a different goal in mind.
Holding PT can be a relatively safe yield strategy, eliminating fluctuations in your returns due to variable APYs. Safe is good, and what's great about Pendle is that low risk doesn't necessarily mean low reward.
PT can also be used to provide liquidity in our liquidity pools, and liquidity providers earn:
- 1.Swap fees from the pools
- 2.$PENDLE incentives
- 3.A portion of PT fixed yield
- 4.A portion of the Underlying yield
Because liquidity provision is done in PT and underlying (e.g. PT-stETH + stETH), LPs will still earn yield from the assets that they provided as liquidity, hence points 3 & 4 above.
The PT that is deposited in the liquidity pool can be withdrawn at any time and sold for profit or redeemed for the underlying token after maturity.
Besides, it is also ridiculously simple to enter this strategy on Pendle thanks to Zap.
- 2.Select your desired token pool
- 3.Deposit the underlying token and receive LP tokens in return
Just like with buying PT, it is ideal to Zap into the LP when the Implied Yield is high. This means that PT will be cheaper (relative to the underlying token), and the resulting fixed rate will be higher.
When it comes to exiting the position, you should look to sell when the Implied Yield is low, or you can hold the LP position and continue earning yield from the pool until maturity, after which the PT can then be redeemed for the underlying token.
Shorting Yield with LP
Long PT = Short yield. Yield traders can quickly switch between Long and Short Yield positions by zapping between YT and LP, instead of YT and PT. This is because an LP position partially holds PT and achieves the same objective of "shorting" yield.
An LP position allows holders to earn additional yields (i.e. swap fees, PENDLE incentives, SY rewards) over pure PT Fixed Yield.