- Buy OTC tokens at a discount — e.g., purchase ARB at 50% below market price with a vesting lock-up.
- Hedge with a 1x short perpetual — open a short position equal to the token notional, neutralizing price exposure.
- Earn yield from the discount + funding — the discount is locked-in profit. Positive funding rates on the short add extra yield.
- Risk: liquidation — if the token price rises enough, the short gets liquidated and the hedge breaks.
Capital model: Total capital = OTC purchase cost + short margin (1x). Yield is calculated on this total capital base.