💪JLP Delta Neutral Enhanced

Overview

The JLP Delta Neutral Enhanced strategy uses advanced quantitative methods to generate yield while remaining market-neutral. It earns fees from activity on Jupiter perpetual markets and offsets exposure via hedging on centralized exchanges. In favorable conditions, additional yield can be generated through funding fees associated with the hedge.

Strategy Design

JLP is acquired by minting through the Jupiter Perpetuals program, and is then deposited as collateral into Jupiter JLP Loan. USDC is borrowed against the collateral and used to purchase additional JLP, with this looping process repeated to increase exposure. The resulting structure is designed to enhance yield while maintaining conservative risk management.

Delta Neutral Hedging

JLP holds exposure to its underlying volatile assets (SOL, BTC, and ETH) & Trader PnL. JLP Delta Neutral Enhanced systematically neutralizes these directional exposures.

JLP Delta Neutral Enhanced Automated Hedging Engine

Borrowed USDC is transferred to Ceffu for custody and mirrored to Binance for execution. The strategy continuously monitors the directional exposures of JLP, including SOL, BTC, and ETH, as well as trader PnL, and uses perpetual futures short positions to hedge.

Hedge weights are dynamically adjusted based on JLP composition, collateral value, and prevailing market conditions, with the objective of maintaining an overall net-zero delta.

Yield

JLP Delta Neutral Enhanced is designed to provide delta-neutral and predictable yield relative to traditional JLP. Yield is generated from:

JLP Native Yield

1. Opening/closing fees.

2. Price impact.

3. Trading fees.

4. Borrowing fees.

JLP earns 75% of the fees generated from these components.

Leverage Amplification

• JLP looping results in leveraged exposure, increasing effective yield.

Funding Rates

• Depending on market conditions, hedging position funding rates can amplify yield. This can also be a cost.

Institutional-Grade Security

JLP Delta Neutral Enhanced operates exclusively under an institutional-grade model within a walled-garden framework, with multi-party policies, role-based approvals, and no single key or entity able to move funds.

NT Vault

• JLP is held within an NT Vault with strict transaction policies - No single team member or entity can move funds without multiple approvals

• Withdrawal addresses are strictly whitelisted within the NT Vault Infrastructure.

• The token list is restricted to prevent low-liquidity manipulation; only interactions with the Jupiter Perps Program are permitted.

• Admin Quorum prevents single-member policy changes

Ceffu Custody/Settlement

• Borrowed USDC are routed to Ceffu, an institutional custody & settlement network.

• These assets remain isolated and in MPC (Multi-Party Computation) custody.

Mirrored Binance Sub-Account

• The equivalent USDC balance is reflected on a Binance sub-account.

Daily PnL Settlement

• Unrealized PnL of hedging positions is settled daily between Binance and Ceffu.

• Settlement ensures:

  • Hedging collateral remains safe

  • No counterparty exposure accumulates

  • Primary collateral never leaves custody or off-chain

This framework isolates trading risk and mitigates exchange counterparty exposure.

Address & Token Whitelisting

• Only pre-approved smart contracts & addresses can receive/withdraw funds

• Only specific tokens are permitted ($JLP - $USDC)

• Prevents unauthorized token movements and pump-and-dump vectors

Vaults Audits

Audits by Quantstamp, Halborn, and Offside Labs confirm:

• Correctness of financial logic

• Integrity of share accounting

• Robust access controls

• Safe deposit/withdraw flows

This provides the institutional-grade foundation that makes the JLP Delta Neutral Enhanced vault secure, predictable, and transparent.

Risk Analysis

Even with heavy mitigation, all financial products carry risk.

Key Risk Domains:

JLP Token Risk

Exposure to JLP mechanics, including trading activity, margining, and token price behaviour.

JLP’s peg may fluctuate relative to its underlying tokens in fast markets (market price vs. virtual price). There is also a threshold for being fully delta-neutral, since rebalancing hurts yields.

Exchange Liquidity & Settlement Risks

Although minimized via Ceffu, Binance perpetual contracts carry:

• Liquidity risk

• Market dislocation risk

• Settlement behaviour (e.g., ADL)

Operational Risks

Mainly relating to:

• Off-chain delta calculations

• Transfers between Ceffu and the on-chain Fordefi vault

• Daily PnL settlement mechanics

Liquidation Protection

Track Record

• Over 16 months running the same strategy fully on-chain on Drift. Returned 31.81% since 6/11/2024.

• Zero liquidation events

• Survived major volatility regimes:

  • Trump token launch volatility

  • Trump tariff announcement shock

  • October 10th Black Swan event

  • Multiple SOL/BTC/ETH volatility spikes

Margin buffers are designed to absorb extreme conditions.

Why Liquidation Risk is Low

The structure benefits from a critical property:

• If short hedges rise in value, the underlying JLP also rises.

Thus collateral value grows in tandem with hedge losses, allowing us to:

• Send more USDC to Ceffu

• Strengthen collateral

• Maintain safe LTV

Fees

• Performance Fee: 25%

• Withdrawal Fee: 0.2% (provided to existing depositors)

Redemptions

Withdrawal: 3 - 4 Days