Crypto glossary
Delta-neutral strategy
A delta-neutral strategy pairs a long position with an offsetting short so price moves roughly cancel out, aiming to earn funding, fees or yield instead.
Delta measures how much a position's value changes when the underlying price moves. A delta-neutral strategy combines exposures so that the total delta is close to zero. The classic crypto version holds spot ETH or staked ETH and opens an equal-sized short on perpetual futures: if ETH rises, the spot gains and the short loses about the same amount, and vice versa. What remains is the income, such as staking yield and funding paid by leveraged longs.
Delta-neutral trades are run by market-neutral hedge funds, DeFi vaults and liquidity providers who hedge their pool exposure. They also underpin synthetic dollars such as Ethena's USDe, whose backing is staked ETH and BTC hedged with short perps on exchanges.
Neutral does not mean riskless. Funding rates can turn negative for long periods, the hedge sits on an exchange that might fail or freeze withdrawals, and a sharp rally can liquidate the short leg if margin is thin. Delta also drifts as prices change, so positions need rebalancing, which costs fees.
Example
A fund holds 1,000 staked ETH and shorts 1,000 ETH of perpetual futures; ETH falls 20% but the portfolio's value barely changes, while it keeps collecting staking rewards and positive funding.