Fee collection and reinvestment — interest on interest

The APR formula

LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → yield is measured in APR (annual percentage rate). The formula is simple:

APR = (daily income × 365) / capital deployed × 100%

Example:

Breakeven APR — the minimum threshold

Breakeven APR is the minimum LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → yield needed for the strategy to be profitable. Think of it as your reference point: as long as you are above it, fees cover the insurance and debt costs. Drop below it, and you simply narrow the range or move to a more active pool (the table below gives you a concrete action for every situation).

Formula:

Breakeven APR = (daily insurance cost + daily debt cost) × 365 / LP capital × 100%

Calculation for Strategy B:

Are we above breakeven?

Coverage ratio — how to read it

The weekly income-collection cycle

Every week, collect your income and allocate it:

How to allocate the income

Say you collected $41.65 in a week ($5.95 × 7):

The growth effect over time

Without reinvesting (income just piles up):

With reinvesting (~30% of income → LP):

Effective APR — the income rate measured against the original $3,200 capital (the pool's APR stays at 67.9%; it is simply a larger capital base doing the work).

Difference over a year: +$230 extra from the growth effect.

Once you understand this cycle, you can turn your weekly income collection into a system that grows itself — you decide deliberately how much goes to safety and how much to growth, instead of guessing.

The 90-day insurance renewal cycle

Every 90 days the options hedge needs renewing. That is what the Insurance Vault is for:

Accumulation:

Weekly USDC → Vault: $12.50
Over 90 days: $12.50 × 13 = $162.50

Insurance renewal cost: ~$150–$200
Coverage: ~81%–108%

What to watch on the platform

What happens when income drops?

LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → income fluctuates — it depends on trading volume. That is not a surprise, it is a predictable variable: you have a prepared action for every market situation, so when volume drops you know exactly what to do:

Module summary

In this module we learned:

Next module: Module 5 — OptionsOptionA financial contract that grants the right (but not the obligation) to buy or sell at a set price.Read the lesson →. We will start with the anatomy of an option and work up to the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →/CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → strategies that protect our portfolio.