Rebalancing across layers
Our strategy has three layers: collateral (lending), LPLPLiquidity Provider β deposits tokens into a pool and earns a share of trading fees.Read the lesson β (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. RebalancingRebalancingRedistributing capital between strategy layers, or moving an LP range.Read the lesson β means cutting and rearranging the layers so they fit again.
The three layers
One LTV reference for the whole module
You'll see several different LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β numbers across this module, so let's agree on what each one means:
| Value | What it means |
|---|---|
| 30β35% | Target LTV. This is where you return after every rebalancing |
| 45% | Warning line β you start reducing debt |
| 55% | Critical line β crisis mode |
| 75% | SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson β collateral liquidation threshold on KaminoKaminoSolana lending protocol. In our strategy: SOL collateral to a USDC loan.Read the lesson β SOL (checked 2026-09; it depends on the collateral type and the market β verify it yourself) |
Why does the example portfolio sit at 42% LTV?
Lessons 6-3 and 6-6 use an example portfolio at ~42% LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β β that's an already-levered, "working" position, convenient for demonstrating scenarios. If you're following the course from zero, your LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β should be 30β35%. The 42% is a parameter of the example, not a recommendation.
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 (back to the 30-35% target LTV)
3. Additional borrowed funds β into LP or options
4. Roll the Put Spread upward
Weekly ritual
Check LTV
Kamino/Aave dashboard. If LTV > 40% β consider rebalancing.
Check LP fees
Are daily fees > breakeven? If yes β harvest fees. If no β consider changing the range.
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?
Harvest and reinvest fees
LP fees β part into collateral (compounding effect), part kept as a buffer.
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:
Rules of discipline
5 rules that separate disciplined management from chaos
- Rebalance rarely β every action has costs and fees, so you only touch it when there's a clear signal
- Filter out daily price swings β react only to weekly/monthly signals, not to noise
- Collateral comes first β collateral is your safety, and it always takes priority over LPLPLiquidity Provider β deposits tokens into a pool and earns a share of trading fees.Read the lesson β
- Stick to the roll window β the rolling window (30d before expiry) is a fixed entry in your calendar
- 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 type | Frequency | Trigger |
|---|---|---|
| Weekly | Every week | Fee harvesting, LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β check |
| Monthly | Every month | Deep portfolio review |
| Crisis | When needed | LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β > 45%, price drop > 20% |
| Growth | As it arises | SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson β +15-20%, LTVLTVLoan-to-Value β the ratio of debt to collateral value. LTV 30% is considered safe. LTV 83%+ triggers liquidation.Read the lesson β 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.
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.