# Delta-Neutral Strategy

Monetrix runs a **delta-neutral** strategy on Hyperliquid: long spot, short perps, net zero price exposure. Yield comes from the structural flows the protocol sits on, not from market direction.

## The basic idea

1. A user deposits USDC, then the protocol buys an equivalent dollar amount of spot assets (BTC, ETH, and HYPE).
2. The protocol opens an equal short perpetual position on Hyperliquid.
3. Spot and short cancel: price goes up, spot gains = short loses. Price goes down, short gains = spot loses. **Net delta is zero.**
4. The combined portfolio earns yield from four structural sources.

Because the portfolio has no directional exposure, sUSDM holders are not taking a bet on crypto prices. They're getting paid for providing the "short" side of the market's leverage demand, a side that, on net, gets paid more often than not.

## The four yield streams

| Source            | What drives it                                                          |
| ----------------- | ----------------------------------------------------------------------- |
| **Funding rate**  | Long speculators paying short holders for leverage                      |
| **Spot lending**  | Interest earned on the spot collateral via Hyperliquid's native lending |
| **Maker rebates** | Fees earned by executing hedges as a market maker instead of a taker    |
| **Dynamic HLP**   | Additional yield from Hyperliquid's HLP vault when funding compresses   |

## Why four sources matter

A protocol with a single yield source has a single failure mode: when that source dries up, yield goes to zero. Stacking four uncorrelated streams means no single regime shutdown kills the yield. The protocol also actively reallocates between them; for example, shifting into HLP when funding compresses.

This is why the design is called **all-weather**: the mix changes, but the total stays positive.

## Where the yield actually ends up

The protocol's earnings flow into the **sUSDM exchange rate**:

```
1 sUSDM today       = 1.0000 USDM
1 sUSDM in 6 months = 1.10 USDM  (example)
```

Your sUSDM balance never changes, but each sUSDM is worth more USDM over time. When you unstake, you receive USDM at the then-current rate.

{% hint style="info" %}
USDM itself is strictly 1:1 with USDC; yield does not accrue to USDM. You must **stake USDM into sUSDM** to earn. See [Stake & Unstake](/guide/stake.md).
{% endhint %}

## Why Hyperliquid makes this work

Running this strategy on-chain used to be prohibitively expensive due to capital fragmentation and execution costs. Hyperliquid removes both bottlenecks; see [Why Hyperliquid](/how-it-works/hyperliquid-native.md).


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