> For the complete documentation index, see [llms.txt](https://praxis-4.gitbook.io/praxis/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://praxis-4.gitbook.io/praxis/documentation/strategies-and-guides/pt-yt-trading-strategies.md). # PT/YT Trading Strategies How to trade PT and YT tokens for fixed yield or leveraged exposure. {% hint style="warning" %} The PT/YT secondary market is a planned feature, not yet live. This page describes strategies that will be available when the liquidity layer launches. {% endhint %} PT and YT are independent ERC-20 tokens. Once the secondary market is live, you can buy or sell either token without holding the other. This can create risk/return profiles that a direct vault deposit alone cannot replicate. This page covers four strategies: two built around PT, two built around YT. For the underlying token mechanics and pricing model, see [PT/YT Trading](/praxis/documentation/advanced/pt-yt-trading.md). *** ## Buying PT — Fixed Return **What you're doing:** Purchasing PT from a depositor who wants to exit before maturity. You buy at a discount to face value; at maturity, you redeem at full value and collect the spread. **The logic:** Every PT redeems for exactly 1 USDC at maturity. If you acquire it below that price, the difference is your locked-in profit. The return is fixed at the moment of purchase (vault APY is irrelevant after you enter). **Example:** 100 PT redeems for 100 USDC at maturity. With 90 days remaining, it is trading at 97 USDC. * You spend **97 USDC** * At maturity, you redeem **100 USDC** * Return: **3.09%** over 90 days (\~12.4% annualised) is guaranteed regardless of vault performance Whether vault APY is 12% or 1%, you collect exactly 3 USDC. The implied yield is priced into the discount at entry instead of earned over time. **When to use it:** * You want predictable, fixed-rate exposure without variance * You believe vault APY will fall below the implied PT yield * You want capital preservation with a defined upside ceiling **What you give up:** Market access. All Praxis prediction market activity requires YT, and a PT-only position has none. If you later want to participate in markets, you would need to acquire YT separately (either by depositing USDC directly or buying YT on the secondary market). {% hint style="info" %} Users familiar with Pendle will recognise this mechanic. The key structural difference in Praxis is on the YT side — Praxis YT accumulates value toward maturity rather than decaying to zero. {% endhint %} *** ## Selling PT — Early Exit **What you're doing:** You hold PT from a vault deposit and want liquidity before the epoch ends. Rather than waiting for maturity, you sell your PT on the secondary market at a discount. **The logic:** You accept a cut on your eventual maturity payout in exchange for capital now. The discount you concede is exactly what the buyer earns as their fixed return. **Example:** You deposited 100 USDC and hold 100 PT with 90 days remaining. Secondary market price: 97 USDC. * You sell for **97 USDC** — 3 USDC less than you would receive at maturity * The buyer locks in their return; you receive capital today * **Your YT is unaffected.** You still hold it and continue earning yield or participating in markets **When to use it:** * You need USDC before the epoch ends * You want to redeploy into a higher-conviction position * You are bearish on vault yield and prefer to keep YT exposure while offloading the fixed-value side **What you give up:** The difference between your sell price and the 1 USDC maturity redemption value. The closer you are to maturity, the narrower the discount and the more of your upside you preserve. {% hint style="warning" %} Selling PT early in an epoch sacrifices a larger spread than selling late. If you only need short-term liquidity, the timing of your sale materially affects your effective exit cost. {% endhint %} *** ## Buying YT — Leveraged Yield Exposure **What you're doing:** Purchasing YT from a holder who wants to lock in their yield early. You gain leveraged exposure to vault APY without depositing USDC yourself. **The logic:** YT represents the yield on a much larger underlying deposit. Because the YT price is a fraction of that deposit value, your capital is amplified relative to the yield it earns. Moves in vault APY produce outsized returns (or losses) on what you actually paid. **Example:** 100 YT represents vault yield on 100 USDC, with 6 months remaining. Vault APY is currently 10%. Expected remaining yield: \~5 USDC per 100 YT. The secondary market prices 100 YT at **4.80 USDC**. | Scenario | Vault APY | YT redeems for | Your return on 4.80 USDC | | ------------- | --------- | -------------- | ------------------------ | | Outperforms | 14% | \~7.00 USDC | **+45.8%** | | In-line | 10% | \~5.00 USDC | **+4.2%** | | Underperforms | 4% | \~2.00 USDC | **−58.3%** | | No yield | 0% | 0 USDC | **−100%** | Your effective exposure is \~20× levered relative to the underlying deposit (4.80 USDC deployed against 100 USDC of yield-generating principal). Returns amplify in both directions. **When to use it:** * You believe vault APY will exceed what the market is currently pricing in * You want prediction market or game access without committing a full vault deposit * You want a defined maximum loss (the purchase price) with amplified upside **What you give up:** Principal protection. The USDC you spend on YT carries no redemption guarantee. If vault yield underperforms, you may recover significantly less than you paid (in the extreme case, nothing). {% hint style="danger" %} Buying YT is the only strategy on this page that removes principal protection entirely. Your full purchase price is at risk if yield underperforms expectations. {% endhint %} *** ## Selling YT — Locking in Yield **What you're doing:** You hold YT (from a vault deposit or a secondary purchase) and sell it before maturity to lock in current value rather than waiting out the remainder of the epoch. **The logic:** YT accumulates value continuously as the vault earns yield. By selling, you receive immediate liquidity at a price reflecting both accumulated yield to date and the market's expectation of what remains. The buyer takes on the risk of whether that future yield materialises. **Example:** You hold 100 YT from an epoch-start deposit. Four months into a six-month epoch, 100 YT has accumulated \~6.7 USDC in yield (vault running at 10% APY). Expected remaining yield over the final two months: \~3.3 USDC. The secondary market bids 100 YT at **9.50 USDC**. * You sell for **9.50 USDC** — capturing most of the accumulated value plus near-full remaining expectation * You give up the final \~3.3 USDC of future yield if APY holds * The buyer receives YT at a slight discount and takes on the remaining two months' yield risk **When to use it:** * You are bearish on vault APY for the rest of the epoch and believe remaining yield will fall below what the market prices in * You want immediate liquidity without burning PT + YT together (which would be a full exit) * You prefer to redeploy capital now rather than carry yield exposure to maturity **What you give up:** The remaining yield upside if vault APY stays strong or increases. Selling YT is selling optionality. You receive certainty now in exchange for the possibility of a better outcome later. {% hint style="info" %} Selling YT is the mirror image of Buying YT. A YT buyer is longing vault APY; a YT seller is effectively shorting the remaining yield, expressing the view that future performance will be below the market's current expectation. {% endhint %} *** ## Comparing the Four Strategies | | **Buy PT** | **Sell PT** | **Buy YT** | **Sell YT** | | ------------------------ | --------------------------------- | -------------------------------- | --------------------------------------------------------- | ----------------------------------------------- | | **Starting position** | No existing position | Holds PT from vault deposit | No existing position | Holds YT from deposit or secondary buy | | **Capital at risk** | Only the discount paid | Forgone maturity premium | Full purchase price | Forgone future yield upside | | **Return type** | Fixed — locked in at entry | Immediate capital | Variable, leveraged | Partial yield, realised now | | **Upside** | Known and capped at the spread | Early access to capital | Amplified if APY exceeds expectations | Certainty on current YT value | | **Downside** | Minimal, spread is the ceiling | Ccut vs. holding to maturity | Potential loss of purchase price | Missed yield if APY outperforms | | **Market access** | No | Yes | Yes | No | | **Principal protection** | Yes | Yes | No | Yes | | **Best for** | Fixed yield, capital preservation | Early exit, capital redeployment | Yield speculation, market participation without a deposit | Yield crystallisation, bearish on remaining APY | *** For the mechanics behind how PT and YT are priced on the secondary market, see [PT/YT Trading](/praxis/documentation/advanced/pt-yt-trading.md).