> For the complete documentation index, see [llms.txt](https://docs.extrafi.io/extra_finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.extrafi.io/extra_finance/academy/pseudo-delta-neutral-pdn-farming-strategy.md).
# Pseudo Delta Neutral (PDN) Farming Strategy
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%.
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.
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