# Pseudo Delta Neutral (PDN) Farming Strategy

<figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2FsV9bmsqqbfVNxgYfDuYn%2FTwitter%20post%20-%20109.png?alt=media&#x26;token=b65c0a8d-5338-4994-8860-45ec6ee45507" alt=""><figcaption></figcaption></figure>

Long and short strategies play vital roles in the financial market. When combined, they create the game-changing delta-neutral hedge. Let's explore how PDN works and why it's well-suited for leveraged farming

The GIF below demonstrates the 30 days PnL of the 3x PDN strategy applied to the USDC-ETH trading pair with a base APR of 40%.

<figure><img src="https://3038127767-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FHdS59PJdwI8kEK3vLZuH%2Fuploads%2FOgoTX1shPgc87qBVyOoR%2FDelta%20Neutral.gif?alt=media&#x26;token=8e002f2e-67eb-4f93-82f2-20cdfb37572b" alt=""><figcaption></figcaption></figure>

PDN farming strategy comprises two positions: a long position and a short position that offset each other's exposure.

Let's take a 3x ETH/USDC PDN position with $400 USDC initial as an example.

One position is $100 USDC with $200 borrowed USDC, $150 USDC is converted into ETH to form the LP, generating a $150 ETH long exposure.

Another one is $300 USDC with $600 borrowed ETH, $150 ETH is converted into USDC to form LP, generating a $150 ETH short exposure.

In this scenario, the total exposure is $150 - $150 = zero (Delta Neutral). However, as the price of ETH fluctuates, the exposure will change, causing the delta to deviate from 0. That's why we call it Pseudo-Delta Neutral. To address this, rebalancing is necessary.

In short, the PDN strategy is perfect for users seeking stable earnings. As shown in the GIF above, it generates a positive PnL across a wide price range (-40% to 50+% on the 30th day). Additionally, it can be utilized to create various volatility derivatives.

While PDN is a fantastic strategy with numerous possibilities, it may appear complex for new users. ExtraFi offers an in-built PDN template to make it accessible to everyone when opening a farming position.

Related post: <https://twitter.com/ExtraFi_io/status/1683489949872533504>


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.extrafi.io/extra_finance/academy/pseudo-delta-neutral-pdn-farming-strategy.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.