Pendle Academy
  • Start Here
  • 1️⃣Pendle 101
    • Chapter 1 - Introduction to Optimizing Yield
    • Chapter 2 - Yield Tokenization Basics
    • Pendle 101 - Key Takeaways
  • 2️⃣Optimizing Yields with Pendle
    • Chapter 3.1 - Fixed Yield on Pendle
    • Chapter 3.2 - More Yield via Liquidity Provision
    • Chapter 4 - Yield Trading Basics with YT
    • Chapter 5 - Important concepts in yield trading
    • Optimizing Yields with Pendle - Key Takeaways
  • Cheatsheet for the Impatient
    • PT / YT / LP Cheatsheet
  • 3️⃣Yield Trading Deep Dives
    • Chapter 6 - Shorting Yield
    • Chapter 7 - Providing Liquidity while Trading Yield
    • Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure)
    • Chapter 9 - Identifying Opportunities to Long/Short Yield
  • 4️⃣Ecosystem & Resources
    • Pendle Wars & "Bribes"
    • $PENDLE Farms
    • Points Trading
      • Points Support Page
    • Withdrawals / Deposits from Other Chains
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On this page
  • Yield Trading 101 with YT
  • Buy YT to long yield
  • Get leveraged yield exposure without borrowing risk
  • How do I profit from buying YT?
  • How to buy YT
  1. Optimizing Yields with Pendle

Chapter 4 - Yield Trading Basics with YT

PreviousChapter 3.2 - More Yield via Liquidity ProvisionNextChapter 5 - Important concepts in yield trading

Last updated 10 months ago

Course level: #intermediate

You’ve made it through the first 3 chapters and learned the , as well as how to use Pendle to from yield. Great job! Now let’s dive deeper to execute various kinds of yield trading strategies through buying and selling YT.

Yield Trading 101 with YT

In this chapter, we will tap into the simplest form of yield trade — buying a YT (Yield Token).

Buy YT to long yield

One way to trade yield with Pendle is to buy YT (). That means you are increasing your yield exposure (long yield). You can either hold it until maturity, or swing-trade it to turn a quick profit, if you buy low and sell high. This strategy works well when you expect the underlying APY of an asset to rise in the future, or when you think the YT price is undervalued (we’ll explain more later).

💡 Remember: YT holders receive the yield of the underlying asset

Get leveraged yield exposure without borrowing risk

Since YT is typically much cheaper than the principal, you effectively get leveraged yield exposure by buying YT. For example, in the image below, you can earn the yield of ~11.9 stETH with just the cost of 1 stETH, which is an 11.9x effective leverage in notional value traded.

How do I profit from buying YT?

You profit when either:

  1. YT price increases, or

  2. Yield received from YT is more than the cost of buying YT

Generally speaking, you are betting that either or both…

  1. the implied APY rises after you buy (which pumps the YT price), and implied APY is driven by market force (supply & demand of YT and PT)

  2. the underlying APY and/or the long yield APY becomes higher (which means yield is being produced faster)

Here’s a table that quickly summarizes what is going in favor or against you as a YT holder. Just flip the arrows’ directions if the indicators go the other way round.

Indicators👇 / Effect 👉
YT Price
YT Yield Receivables

Underlying asset price ⤴️

⬆️

┄

Implied APY ⤴️

⬆️

┄

Underlying APY ⤴️

┄

⬆️

Long Yield APY ⤴️

┄

⬆️

Time to maturity ⤵️

⬇️ (slowly)

┄

In simple terms:

  • A good time to buy YT is when the implied APY is low, which means the YT price is low. You also want to make sure the long yield APY is positive (the higher the better), which suggests that the YT may be undervalued.

  • A good time to sell YT is just the opposite — when the implied APY is high, which means the YT price is high. Also, when the long yield APY is close to zero or even negative, it suggests that the YT may be overvalued.

💡 More on how to better determine when it is a good time to buy or sell YT, in our Chapter 8 - Long Yield (Obtain Leveraged Yield-Exposure).

How to buy YT

  1. Choose an asset and buy its YT

    1. Select an underlying asset and a maturity date you like. Look for one with high underlying APY and/or low implied APY.

    2. Click on the “YT - Long Yield APY” box to continue.

    3. Select your input asset and amount (which will be swapped to the pool’s asset to buy YT, if necessary). This can be a different token to the underlying asset and we will find the best route to swap your asset.

    4. Review the effective implied APY after price impact and fees, which is also the effective cost of your YT, and the effective long yield APY you will earn.

  1. Approve and confirm the transaction.

  2. If you have an open position, click “Dashboard” on the top menu to see your current positions. You can later click the “Claim” button to claim the yield produced by your YT.

Remember: You can exit and sell your YT positions at any time. The Pendle market is 24/7. There’s never any lock or penalty to close your position early in Pendle.

There’s no borrowing involved, so there’s no risk of liquidation or oracle errors. The leverage is simply achieved by , which lets you buy only the yield portion of the asset for a small fraction of the original price.

💡 Don’t worry if you are not familiar with the different kinds of APYs and jargons, we will cover those in the . For now, the summary table below should be enough for most situations.

Go to the “Markets” page from the top menu.

2️⃣
Yield Tokenisation
next chapter
https://app.pendle.finance/trade/markets
basics of PT and YT
earn passive income
Yield Token
Go to “Market” under the “Trade” interface from the top menu bar. Then choose your asset and click “YT”.
With the cost of 1 stETH, you are buying yield exposure of 11.9 stETH. An 11.9x leverage in notional value in this case.
Review the effective implied APY, long yield APY and price impact.
Review the different scenarios of your profit projections. You can also use the “Calculator” on the bottom right of the page to run customized projections.