CHAPTER 08 / 8 · Put it into practice
Turn learning into a position plan.
Write a reviewable objective, range rationale and monitoring plan before committing capital.
A completed course is useful when it changes a decision. Your final output is a short position brief: what you want to own, where you are willing to trade, what could go wrong and how you will review the result.
Jump to the interactive experiment ↓Choose the numeraire before calling a pair low-risk
If ETH and cbBTC both fall 30% in USDC while their ratio is unchanged, a fixed LP position can keep the same token quantities and still lose 30% of its USDC principal value. A stable ratio reduces one kind of inventory conversion; it does not eliminate shared market risk.
A pair of assets you already want to own can be useful for a mandate. Compare the intended final weights, relative volatility, custody/token risks and stress conditions, not merely a historical correlation coefficient. In the optional experiment, change correlation and the two volatility scales independently.
GO DEEPERChoose the pair, not just the yield.
Price the ratio, then price the portfolio
For assets A and B, let S_A and S_B be their USDC prices and P = S_A/S_B be B per A. An A/B range operates on P. Its USDC value is S_B[x(P)P+y(P)]. A quiet ratio can coexist with a large USDC drawdown if both assets fall. ETH/cbBTC therefore has relative ETH/BTC exposure plus the USD risk of both assets and the separate token/custody risks of cbBTC. It is not a stablecoin position.
Correlation needs matching volatility scales
For synchronized log returns, σ²_ratio = σ²_A + σ²_B − 2ρσ_Aσ_B. If both annualized volatilities are 60% and correlation is 0.90, ratio volatility is about 26.83%; at zero correlation it is about 84.85%. Even at correlation one, unequal volatilities leave |σ_A−σ_B| ratio volatility. These are hypothetical inputs, not current estimates for any listed market. Measurement horizon, sampling, lead-lag and changing regimes matter.
- σA, σB: volatility of synchronized log returns on the same horizon; ρ: their correlation.
AssumptionsDescribes relative-price volatility, not the USD drawdown or a stable future correlation.
Desired inventory is an advantage with a mandate
An investor who already wants both assets may accept exposure a neutral dealer would pay to hedge. That can lower the return required for providing liquidity. It does not imply free capital or zero downside. Specify acceptable final weights, concentration, liquidity needs and a loss budget. A portfolio tilt can make economic sense even if it trails static holding over a particular interval; report both the mandate outcome and the opportunity cost.
Related assets are not necessarily correlated
Economic themes do not establish a statistical hedge. A stock and its sector ETF can decouple on earnings; tokenized assets can face different transfer or redemption rules and market hours. Stablecoin pairs can depeg. Estimate normal and stressed dependence separately, including periods when a reference venue is closed. A tight range based only on a calm historical window can concentrate precisely the risk that appears during a break.
Make the objective falsifiable
Instead of “earn a high APR,” write: “Use a defined USDC budget to acquire ETH within these acceptable prices; review acquired ETH, average cost, remaining budget and fees at this cutoff.” Alternatively, specify the inventory weights and drawdown you can accept for ongoing two-way liquidity.
Record the comparison before entry: static starting tokens, a planned purchase schedule, or another explicit allocation. Include costs and a reason to stop. AMM Markets can help discuss policy aligned to that objective, but a bespoke policy cannot guarantee returns, timing or demand.
Start with assets and objectives
Name the pair and quote convention. Choose accumulation, staged reduction or two-way liquidity. State whether you accept the asset left at each boundary, including issuer and depeg risks where relevant. Set a capital budget that reflects what you are prepared to lose or hold through stress; a range is not principal protection.
Make policy and maintenance explicit
Write why the range fits your objective. Record the policy questions to verify: direction, fee components, bounds, access and who can change them. Define a review trigger, acceptable turnover and an exit decision process. A review trigger is a reminder for a decision, not an automatic on-chain stop.
Match the market to the mandate
An existing public market may fit. A restricted market may require a conversation about alignment and access. A bespoke market is a design discussion, not a guarantee that any desired payoff is available. For example, retaining acquired ETH calls for more than simply choosing a buy range. Ask our team what can be enforced by the deployed policy and what still depends on execution.
TRY IT YOURSELF
Make the mechanics visible.
Complete the brief below and download it. It stays in this browser tab until you download or copy it; nothing is sent to AMM Markets. Bring it to a discussion or use it to review a market yourself.
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CHECK YOUR UNDERSTANDING
What does this mean for you?
What would you need to learn about an AMM Markets pool before trusting it with your chosen budget?
CONNECT IT TO AMM MARKETS
From understanding to a real decision.
Take one of three next steps: inspect a live market without depositing, revisit the Lab to test an assumption, or discuss your objectives with our team. Participation is your decision; the learning material remains useful even if you choose not to become an LP.
Discuss your plan with our team ↗Opens Telegram. Your plan is not sent automatically.References and scope
Course edition: October 2026. Distinguish protocol principles from product instructions; actual market parameters come from the live interface and on-chain state.