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

# Earn + Borrow Hedge

> Supply XLM to Vanna's Earn pool for yield, then borrow an equal value of XLM and swap it to USDC - creating a delta-neutral position that earns on both sides.

<Info>
  **Sections used:** Earn · Margin · Trade  ·  **Delta exposure:** None (XLM-neutral)  ·  **Risk level:** Medium  ·  **Complexity:** Medium
</Info>

Supply XLM to Vanna's Earn pool to earn XLM lending yield. Simultaneously, open a Margin Account with USDC collateral, borrow an equal dollar value of XLM, and swap the borrowed XLM to USDC via Spot. The Earn position creates a long exposure to XLM; the borrow-and-swap creates an exact short of the same size. The two cancel out - net XLM delta is zero - while both legs continue to generate yield.

## Why this is delta-neutral

* **Earn position:** you hold XLM in Vanna's pool. If XLM rises, the USD value of your position rises - gain. If XLM falls, it falls - loss.
* **Borrow + swap:** you owe XLM debt. If XLM rises, your debt's USD cost rises - loss. If XLM falls, your debt's USD cost falls - gain.

Sized equally in dollar terms, these two effects cancel exactly. What remains is purely the yield arithmetic: XLM Earn APY plus any yield from the swapped USDC, minus XLM borrow cost.

## How to execute

<Steps>
  <Step title="Supply XLM to Earn">
    Go to **Earn** → select the XLM pool → **Supply** your XLM. Note the dollar value of your position - you will match this amount in the borrow step.
  </Step>

  <Step title="Open a Margin Account">
    Go to **Margin** → **Open Account** if you don't have one yet.
  </Step>

  <Step title="Deposit USDC as Margin collateral">
    Go to **Margin** → **Deposit & Borrow** → deposit USDC as collateral. This backs the XLM borrow - your USDC is not exposed to XLM price movement.
  </Step>

  <Step title="Borrow XLM equal to your Earn position">
    Borrow the same dollar value of XLM that you supplied to Earn. This is the hedge - the borrow offsets the Earn position's price exposure. Keep Health Factor at 1.5× or above.
  </Step>

  <Step title="Swap borrowed XLM to USDC">
    Go to **Trade** → **Spot Swap** → swap the borrowed XLM to USDC. Choose Soroswap or Aquarius, review price impact, and confirm. The USDC lands in your Margin Account.
  </Step>

  <Step title="Deploy USDC for additional yield (optional)">
    Deploy the USDC from the swap to a Blend USDC pool via Farm to earn an additional yield layer on top of the Earn position.
  </Step>
</Steps>

## Example

|                                       |                           |
| ------------------------------------- | ------------------------- |
| XLM supplied to Earn                  | \$500 worth of XLM        |
| XLM Earn APY                          | 12% → earns \$60/year     |
| USDC Margin collateral                | \$300 USDC                |
| XLM borrowed (equal to Earn value)    | \$500 worth of XLM        |
| Borrowed XLM swapped to USDC          | \$500 USDC                |
| USDC deployed to Blend pool (10% APY) | earns \$50/year           |
| XLM borrow cost (15% APR)             | −\$75/year                |
| **Net annual yield**                  | **$60 + $50 − $75 = $35** |
| **Net XLM price exposure**            | **Zero**                  |

<Note>
  This strategy is profitable when XLM Earn APY + USDC farm APY exceeds the XLM borrow APR. If borrow costs rise, the net yield narrows - monitor all three rates regularly.
</Note>

## Exiting the position

Exit in reverse order to avoid leaving open debt:

<Steps>
  <Step title="Withdraw from Blend USDC pool">
    Go to **Farm** → select the Blend USDC pool → **Remove Liquidity** → withdraw your full position.
  </Step>

  <Step title="Swap USDC back to XLM">
    Go to **Trade** → **Spot Swap** → swap enough USDC to cover the full XLM debt, including accrued interest.
  </Step>

  <Step title="Repay the XLM borrow">
    Go to **Margin** → **Repay** → repay the full XLM debt.
  </Step>

  <Step title="Withdraw USDC collateral">
    Withdraw your USDC collateral back to your wallet.
  </Step>

  <Step title="Withdraw from Earn">
    Go to **Earn** → **Withdraw** → redeem your vTokens and receive your XLM plus all accrued yield.
  </Step>
</Steps>

## Risk profile

| Risk                | Level  | Notes                                                            |
| ------------------- | ------ | ---------------------------------------------------------------- |
| XLM price risk      | None   | Earn position and borrow debt cancel exactly when sized equally  |
| Liquidation risk    | Medium | Health Factor drops as borrow interest accrues                   |
| Rate risk           | Medium | Strategy turns negative if XLM borrow APR exceeds combined yield |
| Swap slippage       | Low    | Check price impact on the XLM → USDC swap before confirming      |
| Smart contract risk | Low    | Inherent to all on-chain protocols                               |

## What to monitor

**Rate condition** - The strategy earns positively only when XLM Earn APY + USDC farm APY > XLM borrow APR. If borrow rates spike, exit before the yield goes negative.

**Hedge ratio** - The XLM borrow must equal the Earn position's dollar value. If XLM moves significantly between the two operations, the hedge may be slightly off - rebalance if needed.

**Health Factor** - Monitor regularly. Accruing borrow interest reduces HF over time even without price movement.

## Related

* [Supply to Earn](/guides/earn/supply)
* [Borrow](/guides/margin/borrow)
* [Spot Swap](/guides/trade/spot-swap)
* [Single-Asset Pools](/guides/farm/blend-pools)
* [Health Factor](/guides/margin/health-factor)
* [Repay](/guides/margin/repay)