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Strategies

Information on Gamma's strategies

Introduction

Gamma's vaults can use a variety of management strategies. The choice of strategy depends on the asset classes, the fee tier, and many other variables.
Gamma continues to test and develop innovative strategies for managing concentrated liquidity.

Main Strategies

Dynamic Range (Wide / Narrow)

From Uniswap Labs

Description

Liquidity ranges are automatically rebalanced when certain rebalance triggers are hit. Liquidity ranges can be set for a pair, and rebalances are automatically triggered by the price moving a certain percentage one way or another.
The wide-range strategy caters to long-term liquidity providers and their risk preferences. It takes into account high volatility and rewards in the selection of ranges.
The narrow-range strategy caters to short-term liquidity providers and their risk preferences. The narrower ranges will earn more in fees and rewards but likely incur more losses in a high-volatility environment.

Applicable Pool Types

A stable-stable, stable-volatile, or volatile-volatile asset pair.

Example Vaults

WBTC-WETH Pair 0.05% - Mainnet agEUR-WETH Pair 0.05% - Mainnet WETH-USDC Pair 0.05% - Optimism USDC-WETH Pair 0.05% - Polygon

Advantages

Accrued fees will be compounded back into the position regularly on behalf of LPs compounding yield. Auto-rebalancing allows for a passive LP experience.
Wider ranges generally have less impermanent loss in a high-volatility environment. Over the long run, the savings in impermanent loss will likely outweigh the higher fees in a narrower range.
In a low volatility environment, narrower ranges generally earn more in fees and perform better due to earning at a higher fee multiplier without suffering much impermanent loss.

Risks

Upon each rebalance, price ranges are set at a fixed range of the current price, and asset allocations could vary from 50/50.
In a low volatility environment, wider ranges may earn less in fees and perform worse due to earning at a lower fee multiple.
In a high-volatility environment, narrower ranges incur more impermanent loss and divergence costs. Over the long run, the higher fees in a narrower range will likely not outweigh the impermanent loss.

Stable

From ChartEx

Description

Liquidity ranges are aimed to straddle one asset at various ranges depending on backtesting results. For more volatile stablecoin pairs, wider ranges will be used. For blue-chip stables, narrower ranges will be used.

Applicable Pool Types

A stable-stable asset pair

Example Vaults

USDC-DAI 0.01% - Optimism sUSD-DAI 0.05% - Optimism USDC-FRAX 0.05% - Polygon

Advantages

Accrued fees will be compounded back into the position regularly on behalf of LPs compounding yield.

Risks

During times of high volatility in the markets, asset allocation could vary significantly from 50/50.

Pegged Price

Description

Liquidity is provided directly around the net asset value of a provided asset.

Applicable Pool Types

A wrapped, staked ETH derivative asset will be provided only within a fixed range around its net asset value.
Example Vaults
rETH-WETH 0.05% - Mainnet

Advantages

As the net asset value hits certain price targets, the liquidity position will be automatically rebalanced.

Risks

During high market volatility, the actual market price can go out of range, and the position will not earn fees.

Advanced Strategies

Delta Hedging

Gamma Hedging

Momentum Hedging

Pairs Trading