PT/YT/LP Strategy Cheatsheet

What is FIVA?

FIVA lets you earn better yields. We help you secure better certainty and better returns (i.e. higher APY).

  1. Earn fixed yield (with PT)

  2. Provide liquidity (LP) to earn extra yield with minimal or zero impermanent loss (IL)

  3. Long yield (with YT)

PT & YT — a quick round-up

Imagine FIVA being a marketplace where property owners can split and trade their principal (rights to the ownership of the property) and yield (rights to rental payments) separately. You can then sell or trade the yield portion even before maturity. This creates new ways to manage and even speculate on yield.

💡 Using stTON as an example: Principal (Right to Principal of stTON) + Yield (Rights to stTON yield) = Yield-bearing asset (stTON)

Principal Token (PT)

  • 1 PT lets you redeem 1 unit of the original asset at maturity date.

  • PT is similar to zero-coupon bond in traditional finance.

Yield Token (YT)

  • 1 YT lets you receive the yield of 1 unit of the original asset until the maturity date, claimable in real-time.

  • YT is similar to detached coupons of bonds in traditional finance.

You can sell PT and YT anytime on FIVA market, with no lock or penalty, at market price. They are traded 24/7.

Perhaps the most important takeaway about PT & YT:

💡 PT Price + YT Price = Underlying Asset Price


PT Cheatsheet — Earn fixed yield

TL;DR

Earn guaranteed amount of your chosen asset if you hold the position until the maturity date.

Yield source

PT has a lower entry cost compared to underlying asset, its value grows over time and becomes 1:1 redeemable to the base asset at maturity date. Your realised discount becomes your fixed yield.

Volatility

Low

Investment profile

Long term

Level

Beginners friendly

Guaranteed

Both capital and return are guaranteed, if you hold until maturity

Underlying asset yield outlook

Bearish

Price changes

Price rises in the short term with…

  1. Time

  2. Falling FIVA APY

  3. Rising underlying asset price (and vice versa). Note that PT is always 1:1 redeemable to base asset at maturity date.

Valuation

PT is cheap when FIVA APY is much higher than the Underlying APY

Time to enter

  1. If you believe the asset will generate less APY in the future,

  2. If you want to hedge against falling yields,

  3. If you feel satisfied enough with the advertised APY,

  4. If you believe PT is too undervalued

Early exit

Anytime, there’s no lock or penalty. PT always has a market price in Pendle’s AMM.

Capital efficiency

No leverage by itself. However, in the future may appear lending platforms that allow you to deposit PTs as collateral to borrow assets, or even loop-leveraging.

Other comments

PT can be a viable alternative to spot, with similar risk exposure, and the benefit of downside cushion thanks to the fixed yield realized upon redemption. PT can also be a short-yield strategy, you may profit in short-term if underlying yield goes down.

Can I profit if I early exit my PT?

When you exit early, your earnings will depend on the PT’s market price at exit. You may earn higher or lower (in extreme cases, at a loss) than the advertised APY at entry. Note that, however, PT is always 1:1 redeemable to the base asset at the maturity date, you do not necessarily need to sell under unfavorable short-term price moves.

YT Cheatsheet — Increase yield exposure (Long yield)

TL;DR

Increase your yield exposure (long yield). Either hold it until maturity, or buy low and sell high to turn a quick profit. You profit when either or both…

  1. the price of YT rises,

  2. the yield produced by the YT becomes bigger than your cost buying the YT

Yield source

YT receives all yield produced by the underlying asset until maturity date, claimable in real time.

Volatility

Higher

Investment profile

Short or Long term

Level

Intermediate to Advanced investors

Guaranteed

N/A

Underlying asset yield outlook

Bullish

Price changes

Price rises with…

  1. Rising FIVA APY

  2. Rising underlying asset price

  3. Rising yield/reward price (if applicable to that asset) Note that time works against YT — YT price gradually falls over time to zero at maturity.

Valuation

YT is cheap when FIVA APY is much lower than the Underlying APY

Time to enter

  1. If you believe the asset will generate more APY in the future,

  2. If you want to hedge against rising yield,

  3. If you want to speculate on short-term rise of yield % or yield token prices

  4. If you believe YT is too undervalued

Early exit

Anytime, there’s no lock or penalty. YT always has a market price in FIVA's AMM.

Capital efficiency

Since YT is much cheaper than the underlying asset, you effectively get a leveraged yield exposure (typically 20x or more), with no actual borrowing involved. So there’s no liquidation or oracle error risks.

LP Cheatsheet — Earn passive extra yields providing liquidity

TL;DR

Earn extra “free” yields on top of your otherwise idle yield-bearing assets. A FIVA pool is denominated in your selected underlying asset only (PT + SY) (SY = wrapped underlying asset). There’s also no impermanent-loss (IL) concern at maturity.

Yield source

Multiple avenues:

  1. Native yields — asset’s underlying yield + PT’s fixed yield

  2. Swap fees

  3. In future FIVA incentives

Volatility

Low IL is minimal (pool consists of highly correlated tokens only) before maturity date. No IL at maturity date because PT in the pool will become 1:1 redeemable to underlying asset.

Investment profile

Short or Long term

Level

Beginners friendly

Guaranteed

APY not guaranteed but capital is guaranteed if you hold until maturity

Underlying asset yield outlook

Slightly bearish, due to some presence of PT in the pool

Price changes

Short term price change behavior is similar to PT due to some presence of PT in the pool. Note that the PT in the pool is always 1:1 redeemable to underlying asset at maturity date.

Time to enter

Anytime. Timing or underlying yield outlook aren’t very important. When FIVA APY is low, it is more favorable to enter and vice versa.

Early exit

Anytime, there’s no lock or penalty. Your APY is also not affected if you exit early.

Comment

Can be used to hedge against falling underlying yield due to some presence of PT in the pool.

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