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Modulis 6 Β· Strategies
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Rebalancing across layers

Our strategy has three layers: collateral (lending), LP (liquidity provision), and options. Sometimes you need to reallocate capital between them β€” we call this rebalancing (restoring the layers' proportions).

A simple analogy

The strategy is like a three-layer cake. Each layer has its own size. If one layer gets too big or too small, the cake stops working. Rebalancing means cutting and rearranging the layers so they fit again.

The three layers

LayerProtocolPurposeShare
Layer 1: CollateralKamino SOL / Aave ETHCollateral + interest~60%
Layer 2: LPOrca SOL / Uniswap ETHFee generation~30%
Layer 3: OptionsDeribitProtection + premiums~10%

When do you rebalance?

Trigger 1: LTV too high

LTV > 45% β†’ ACTIONS:
  1. Stop collecting LP fees
  2. Collected USDC β†’ repay part of the debt
  3. If that's not enough β†’ close part of the LP
  4. USDC from LP β†’ repay debt
  5. Target: LTV < 35%

Trigger 2: LP fees too low

LP APR < Breakeven APR β†’ ACTIONS:
  1. Calculate: do fees cover theta + debt cost?
  2. If NO β†’ reduce the LP position
  3. Freed-up USDC β†’ collateral or debt repayment

Trigger 3: Options getting pricier (IV spike β€” a sudden jump in implied volatility)

IV > 100% (very high) β†’ OPPORTUNITY:
  1. Sell additional call options (bigger premium)
  2. Part of the premium β†’ top up collateral
  3. But ONLY if LTV is safe

Trigger 4: Price jump (rebalancing upward)

SOL rises 20%+ β†’ ACTIONS:
  1. Collateral value went up β†’ LTV dropped
  2. You can borrow more (LTV back to 30%)
  3. Additional borrowed funds β†’ into LP or options
  4. Roll the Put Spread upward

Weekly ritual

1

Check LTV

Kamino/Aave dashboard. If LTV > 40% β†’ consider rebalancing.

2

Check LP fees

Are daily fees > breakeven? If yes β†’ harvest fees. If no β†’ consider changing the range.

3

Check the options

How many days to expiry? If < 30d β†’ roll the Put. What is the IV level? Is it worth selling additional calls?

4

Harvest and reinvest fees

LP fees β†’ part into collateral (compounding effect), part kept as a buffer.

5

Write it down

A short note: what you did, why, and the numbers involved. This helps you later.

Monthly rebalancing

A deeper review once a month:

QuestionAction if YES
Is LTV in the right range (25-35%)?Change nothing
Is LTV too low (below 20%)?You can borrow more β†’ into LP
Is LP APR above breakeven?Consider growing the LP
Is the options coverage sufficient?If not β†’ adjust the strikes
Has market sentiment changed?You can adjust the delta

Rules of discipline

5 rules that separate disciplined management from chaos

  1. Rebalance rarely β€” every action has costs and fees, so you only touch it when there's a clear signal
  2. Filter out daily price swings β€” react only to weekly/monthly signals, not to noise
  3. Collateral comes first β€” collateral is your safety, and it always takes priority over LP
  4. Stick to the roll window β€” the rolling window (30d before expiry) is a fixed entry in your calendar
  5. Rebalance in steps β€” not 100% at once, but gradually

Capital flow diagram

Normal mode:
  LP fees β†’ 70% collateral + 30% buffer
  Options premiums β†’ collateral
  Interest β†’ compounds automatically

Crisis mode (LTV > 45%):
  LP β†’ close β†’ USDC β†’ debt repayment
  Options β†’ sell Put (collect premium) β†’ collateral
  Target: LTV < 35%

Growth mode (SOL +20%):
  LTV dropped β†’ borrow more
  Additional debt β†’ into LP or options
  Roll the Put upward

Summary

Rebalancing typeFrequencyTrigger
WeeklyEvery weekFee harvesting, LTV check
MonthlyEvery monthDeep portfolio review
CrisisWhen neededLTV > 45%, price drop > 20%
GrowthAs it arisesSOL +15-20%, LTV too low

With these triggers, you start reading the portfolio like a dashboard: you see a signal, you know the action, and you can reallocate capital calmly instead of waiting for the situation to reach a critical zone.

Quick check
At what LTV level should you start a rebalancing action (reducing debt)?
Practice task
0 / 5
Write down your own rebalancing rules

Rebalancing without rules turns into chaotic fiddling. This task is on paper β€” write down your triggers and actions IN ADVANCE, no real trades (~15 min).

This is learning, not investing β€” use only small amounts you treat as tuition.

You just wrote down your own rebalancing triggers and actions ahead of time β€” that's how professionals manage capital, unlike most, who react in a panic in real time.

From learning to the platformPortfolio tracking