Index Coop announced the launch of the Market Neutral Yield token MNYe (pronounced “money”), a tokenized strategy that gives holders access to a compelling source of USD-denominated yield by executing a basis trading strategy on Perpetual Protocol’s Optimism market.
With MNYe, holders can earn a variable yield, settled in USD, that is not dependent on inflationary protocol incentives and has no price exposure to Ethereum. This is Index Coop’s first product to be released on Optimism’s Ethereum layer 2.
The Market Neutral Yield token democratizes a basis trade strategy that is most commonly performed by hedge funds and sophisticated financial professionals. The MNYe token simplifies this complex trading strategy into a simple erc20 token that is liquid on Optimism and composable throughout the network’s growing DeFi ecosystem.
Basis trading, also known as cash and carry arbitrage, is an established strategy for achieving price-neutral profit by arbing the difference between an asset price on the spot and near-term futures markets. In DeFi, perpetual swaps – also called perpetuals or perps – can be used in lieu of futures. First implemented by BitMEX, perpetuals are futures with no settlement date.
The MNYe product takes simultaneous long spot and short perpetual positions and derives yield from the funding rate, which is generally paid by long perp positions to short perp positions. By taking a fully hedged position, the product has no net asset price exposure. MNYe will use a 1x long ETH spot position and a -1x short ETH perp settled in USD. The yield will be further enhanced by thrice-daily auto-compounding when the USD funding balance is positive. The yield is used to maintain a leverage position between -1x and -2x.
MNYe is the second of Index Coop’s yield bearing products, after the Interest Compounding ETH Index (icETH), fulfilling the mission to create decentralized financial products that unlock prosperity for everyone.
