The key concepts

The strategy's rule of thumb

You can think of the position in terms of 3 “sub-positions”:

1. We own S USDC as collateral and owe X WETH tokens and Y WBTC tokens to aave.

2. We own X +- dx WETH tokens and Y -+ dy WBTC tokens that are kept in UniV3 pool. Amounts dx and dy vary due to AMM design: the variability in essence causes Impermanent Loss.

3. We receive F — trading fees from UniV3 pool, L — lending return and need to pay I — borrowing interest. Usually revenue F + L significantly outweights expenses I.

Due to Cetra’s rebalancing mechanism, dx and dy IL variations are kept small and on position closing we own in pool almost exact X and Y to repay the debt (fee revenue is partly used to compensate the shortage).

After repaying we can redeem back our collateral S plus remaining fees converted to USDC, and enjoy the USD - notioned yield.