What's the best timing for unwinding my leveraged Pendle position?

Depending on the type of PT you have, the optimal timing for unwinding your position varies, with factors such as slippage and trade size impact playing a role.

The first thing to keep in mind is whether your PT yield-bearing asset is instantly withdrawn or not, as this impacts how our unwinding recipes work.

• For assets that are instantly withdrawn - It allows for the PT to be redeemed into the yield-bearing asset, and for the yield-bearing asset to be withdrawn into the underlying stablecoin, which is swapped into the debt asset. In turn, because stablecoin pairs typically have much deeper liquidity than pairs involving the yield-bearing asset and its underlying token, these swaps result in lower slippage and trade size impact.

• For assets that are not instantly withdrawn - It means that once the PT is redeemed into the yield-bearing asset, it has to be swapped into the underlying stablecoin, and not directly withdrawn. Then, the stablecoin is once more swapped for the debt asset. This means that for these positions, there are two swaps that occur during unwinding, meaning that slippage and trade size impact have a larger impact. Additionally, we need to consider the liquidity pool sizes of the yield-bearing asset for the underlying stablecoin.

Along with this factor, we need to keep in mind how the redemption of the Principal Token works. There are two options:

• The PT is redeemed for 1:1 worth of the yield-bearing asset worth $1 at maturity.

• The PT is redeemed for $1 worth of the yield-bearing asset, but not at 1:1. For example, PT sUSDe is redeemed for 1 USDe's worth of sUSDe. Considering that sUSDe's value will be above $1, the PT is redeemed for less than 1 sUSDe. For example, if, at redemption, sUSDe is worth $1.18 due to its inherent yield, and it's being redeemed for 1 USDe worth of sUSDe, we do a simple calculation: 1 / 1.18 = 0.8474576271 So when redeeming 1 PT sUSDe, we get 0.847 sUSDe

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If your yield-bearing asset is redeemed 1:1 and instantly withdrawn:

For these positions, it's worth considering unwinding at full maturity.

This ensures you get $1 of the yield-bearing asset that can be instantly withdrawn for $1 of a stablecoin. Then, the stablecoin is used to swap into the debt asset.

This means your unwinding strategy has only a single swap that may be impacted by slippage and trade size impact.

While unwinding your position at maturity means that a lot of users will put selling pressure on the underlying stablecoin into the debt asset - there should be enough liquidity for stablecoin assets where slippage and trade size impact won't eat much into your profit.

If your yield-bearing asset is not redeemed 1:1 and is not instantly withdrawn:

For these positions, it becomes a bit trickier.

First, a considerable factor is that you're first relying on liquidity pools that have a yield-bearing asset, and its underlying stablecoin as the pair.

This also means that there's going to be a smaller amount of liquidity available than with stablecoin-stablecoin pools.

So, when maturity hits, these pools will have a lot of pressure on them, which means if you unwind at maturity, you might experience considerably more loss on slippage and trade size impact than before maturity.

As such, it's worth considering an unwind between 4-7 days before maturity. This ensures your PT has accrued value as its close to maturity, and you're less likely to experience the liquidity squeeze that might occur on maturity.

Please note that DeFi Saver does not offer financial advice - and that this guide is meant to give a better idea of how unwinding Pendle positions works on DeFi Saver from a cost-efficiency perspective. Ultimately, the swap price, slippage, TSI, and other factors that impact the final net position change from day to day, and forming a definitive, reliable strategy is not possible.