Underlying Derivatives

To maintain the delta-neutral nature of $UTY, the protocol offsets each long spot purchase with a corresponding short position in derivatives markets. This ensures that exposure to price fluctuations is neutralized, effectively stabilizing the underlying value of assets used in the system.

Current Derivative Instruments

To achieve this hedge, for every $1 of the native protocol asset purchased, the protocol simultaneously shorts the native protocol asset via derivatives in equivalent notional value. Initially, we utilize:

• Coin/USD Perpetual Futures on Centralized Exchanges

These perpetual futures contracts allow us to maintain short exposure against the native protocol asset price movements without requiring periodic rollovers. The centralized exchanges currently used for this purpose include:

• Binance

• Bybit

• OKX

By executing short positions in these liquid derivatives markets, we effectively neutralize directional risk while maintaining efficient capital allocation.

Future Expansion of Hedging Instruments

As the protocol scales and liquidity dynamics evolve, we may explore additional derivatives or alternative hedging mechanisms, including:

• On-Chain Perpetuals and Options – Utilizing DeFi-native perpetual futures or options markets to decentralize the hedging strategy.

• Structured Products – Considering synthetic derivatives or structured vaults to optimize capital efficiency and risk management.

• Alternative CEX/DEX Derivatives – Expanding to other venues with deep liquidity to enhance execution reliability and arbitrage efficiency.

Our approach remains adaptable, ensuring that the most effective and capital-efficient hedging instruments are utilized to maintain the integrity of the delta-neutral strategy.