Profit when APY goes up!
- 2.Buy YT
- 1.Select the YT you want to buy.
- 2.Select input asset (i.e. what you want to use to buy YT)
- 3.Review the Output and Price Impact of your trade.
- 4.Approve and confirm the transaction
- 3.Passive Management - Hold YT and collect all the yields until expiry Active Trading - Sell YT when Implied APY increases
YT lets holders receive all the yield generated by the underlying asset up until maturity, and it can be sold anytime.
For example, having 5 YT-GLP means you will receive all the yield generated by 5 GLP until 28 March 2024, the expiry date.
Underlying APY is the current yield of the underlying.
Purchasing YT gives you the right to receive the yield of the underlying, which is denoted in the app by Underlying APY. (e.g. YT-stETH holders receive yield from stETH)
Implied APY on the other hand represents the price that YT is trading at. The Implied APY can move independently from the Underlying APY.
You can also treat Implied APY as an indicator of where the market thinks yield will go - up or down.
When Implied APY is low = YT is cheap
When Implied APY is high = YT is expensive
As long as all the future yield collected (i.e. the Average Underlying APY) is more than your cost of buying YT, then you will profit.
Scenario When Implied APY < Underlying APY
Scenario When Implied APY > Underlying APY
YT is cheap when Implied APY is low relative to the Underlying APY.
As long as the Underlying APY stays above the Implied APY you bought YT at, you will likely profit from this trade.
Profit = Total Yield Collected from YT - Cost of YT
YT can be sold anytime. Just like any other tokens, you can also profit from “buying low, selling high” with YT.
You can profit by monitoring the Implied APY, and selling off your YT when Implied APY increases.
Profit = (Total Yield Collected + Revenue from YT Sale) - Cost of YT
Just because YT is relatively expensive doesn’t necessarily mean that it’s overvalued.
For example, GMX could be close to successfully partnering up with Google and Amazon, providing a catalyst for GLP yield to skyrocket in the future due to increase in user activities, interests and ultimately swap fees, rewards etc.
In this case, it might be a good idea to purchase YT now ahead of time.
Another way to evaluate the value of Implied APY is by analyzing its historical trend on Pendle.
Price impact is the difference between the market price and the execution price. This is denominated in implied yield terms in Pendle as you're trading yield.
A large price impact can result in you receiving less than expected, so make sure to keep an eye on this when buying YT.