> ## Documentation Index
> Fetch the complete documentation index at: https://docs.thaler.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Perpetual markets

> The hedge leg of a Thaler vault. How a short perpetual offsets the long SOL exposure, and how funding income contributes to total yield.

## Role within the vault

The staking and lending legs leave the vault long SOL exposure: the position holds staked SOL plus re-staked SOL, so its value moves with the price of SOL. To make the vault delta neutral, the hedge leg opens a short SOL perpetual position of equal size.

When the SOL spot price moves, the long staking exposure and the short perpetual exposure move in opposite directions. The two cancel out, and the user's payout reflects the rates earned rather than the price action.

The short position also receives a funding rate when SOL perpetual funding is positive. Historically, SOL perpetuals have spent most of their time in positive funding, so the hedge adds a third source of yield on top of staking and the lending spread.

## Supported venues

| Venue       | Status      |
| ----------- | ----------- |
| Hyperliquid | Live        |
| Pacifica    | Live        |
| Phoenix     | Coming next |
| Bullet      | Coming next |
| Bulk        | Coming next |

The hedge currently runs on Hyperliquid or Pacifica, selected per vault. The selection is part of the policy extension and is locked at creation.

These venues were chosen because they:

* Publish funding rates in real time with a verifiable history.
* Support SOL-USDC perpetuals with deep liquidity.
* Expose a programmatic interface usable by the worker without manual intervention.

When the additional venues come online, vaults route to whichever offers the best risk-adjusted funding profile at the moment of execution, subject to policy constraints.

## Why a perpetual rather than a future-dated short

A perpetual position never expires. It can be held for the lifetime of the vault without a roll, and its funding rate adjusts continuously to track the spot-futures basis. A future-dated short would require periodic rolls, each introducing slippage and a small operational risk window.

Perpetuals also pay or receive funding every funding period, which lets the funding income compound rather than accumulate to a single settlement.

## Behaviour by funding regime

| Regime          | Funding sign          | Worker behaviour                                | Net effect on vault                           |
| --------------- | --------------------- | ----------------------------------------------- | --------------------------------------------- |
| Bull            | Strongly positive     | Hedge held at full target size                  | Hedge contributes the largest share of return |
| Sideways        | Mildly positive       | Hedge held at target size                       | Hedge contributes a steady, modest share      |
| Bear, brief     | Briefly negative      | Hedge size reduced; vault remains delta neutral | Hedge cost limited; carry continues           |
| Bear, sustained | Persistently negative | Hedge size minimised within the policy bounds   | Carry from lending and staking dominates      |

The vault never closes the hedge entirely while a lending leg is open. Doing so would leave the position directionally exposed, and the policy refuses any instruction that would create such an exposure.

## Leverage on the hedge

The hedge leg uses leverage. The leverage is bounded by the policy extension and is calibrated so that:

* A margin buffer protects against intra-day volatility.
* The vault never operates within a margin-call distance of the venue's auto-deleveraging band.
* Funding income is meaningful at the scale of the deposit.

Higher leverage on the hedge is the principal difference between the `Safe` and `YOLO` tiers of Thaler One.

| Tier         | Funding contribution to net yield |
| ------------ | --------------------------------- |
| Safe         | Smallest                          |
| Conservative | Small                             |
| Balanced     | Roughly even with carry           |
| Optimistic   | Larger                            |
| Aggressive   | Dominant                          |
| YOLO         | Dominant and most variable        |

Higher leverage increases the funding income but also increases the sensitivity of the realised return to funding regime changes.

## Response when funding flips negative

If funding turns negative, the short pays rather than receives. The worker has two levers:

1. **Reduce the hedge size** so the negative funding bill shrinks. This trades hedge precision for lower funding cost.
2. **Rebalance more frequently** so the position spends less time on the wrong side of the funding curve.

Both responses are bounded by the policy. Neither response is large enough to leave the position directionally exposed.

## Next read

<Columns cols={2}>
  <Card title="Custody and policy" icon="key" href="/overview/custody-and-policy">
    Where the leverage cap and the rebalance rules live, and why they cannot change once
    signed.
  </Card>

  <Card title="Yield floor" icon="shield-check" href="/security/yield-floor">
    What backs the per-tier floor when funding regimes turn against the hedge.
  </Card>
</Columns>