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The information presented in Euler Docs is for educational purposes only and does not constitute financial advice. It is recommended to conduct your own research before making trades.

Finding Profitable Trades

Thanks to its advanced features in risk configuration and vault interoperability, Euler v2 is fertile ground for highly capital-efficient marketplaces impossible anywhere else. This makes Euler an attractive venue for 3 market strategies: trading, looping, and farming rewards.

Pair Trading​

If you believe a certain asset will appreciate in value relative to another, you can exercise your hypothesis as a Multiply position on Euler. The most convenient place to explore such opportunities is the Multiply Page.

While browsing pairs take note of 3 important parameters:

  • Max Multiplier: The maximum permitted leverage multiplier you can achieve for the pair.
  • ROE: The return-on-equity is the annualized APY paid or received on your notional margin amount. This works similarly to a funding rate in futures or perpetuals exchanges except it is paid continuously while your position is open. Keep in mind that the table shows the ROE at maximum leverage. When setting up a position through Open Position you can observe the position ROE as you adjust the parameters.
  • Liquidity: This is the available liquidity in the Short Market that determines the maximum position size that can be created. Note that as a market's borrow interest rate increases with utilization so it is best to avoid borrowing all available liquidity.

Stablecoin Margin​

If you are looking to trade a USD pair, keep in mind that unlike many trading venues, trades on Euler are made against a specific stablecoin e.g. USDC, USDT, USDS. Take care when choosing the stablecoin for your margin positions because each one has different risk profile. Some stablecoins have intrinsic yield which could make some positions less profitable than expected.

Yield Looping​

Looping or carry trading is a strategy where you long a yield-bearing asset against its non-yield-bearing underlying. These trades are very popular because the assets are highly correlated which reduces (but does not eliminate) price risk. By applying leverage you can achieve high yields on the underlying asset. Examples of such trades are wstETH/ETH, sDAI/DAI, or PT-LBTC/WBTC.

The most convenient place to explore yield looping opportunities is the Multiply Page. Filter the table by choosing your short asset and sort by ROE to discover profitable correlated pairs.

Risk Considerations​

While yield looping generally carries less liquidation risk there are some important details worth paying attention to.

  1. Check the oracle configured for pricing the yield-bearing asset. Exchange rate oracles are preferred as they do not reflect temporary price volatility.

  2. Some assets classes like LSTs and LRTs may depeg naturally while others like yield-bearing stables do not.

  3. When opening a large trade keep in mind the price impact. If it is large it may take a few days for the position to turn profitable.

Farming Rewards​

Some markets may have active rewards campagins that are used to incentivize deposits or borrows. Rewarded vaults can be identified by ✨ sparkles next to the APY.

A simple strategy is to take advantage of these rewards by maximizing the Net APY on your position. Optionally this position can be hedged on Euler or elsewhere if the directional exposure is not desired.