Everyone talks about yield farming, but almost no one understands yield trading. Exponent Finance and Pendle have built entire markets around it. If you want to play in these markets, there are key principles you must understand. Pendle is the yield market for the EVM while Exponent is the yield market for Solana. Both let you trade yield like it is its own asset. To understand how they work, start with four concepts: • PT • YT • Implied APY • Maturity PT (Principal Token): PT is simply the underlying asset without any of its future yield. Let's say you deposit stUSDe into Pendle and it splits into PT-stUSDe and YT-USDe. Basically, you buy PT at a discount and redeem the full asset at maturity. It is essentially a crypto version of a discounted bond. YT (Yield Token): YT is the future yield you earn on the asset until maturity. Besides the Yield, people buy YT as so form of leverage in campaigns. It gives you more exposure with minimal financial commintment. Study projects like @bulktrade, @hylo_so, @solsticefi and @almanak YT is where the upside and the pain live. If the market underprices future yield, YT prints. If market expectations shift or new incentives launch, YT can collapse. YT-eUSX is the perfect example. It crashed once the YT-USX pool released with a 30x multiplier. Implied APY: This is the yield traders "believe" the asset will generate. If actual yield comes in higher than implied APY, YT becomes extremely profitable. If PT trades at a heavy discount, implied APY goes up. It is the same logic as forward interest rates in bonds. If you understand implied APY, you'd could actually find some loopholes to exploit. Maturity: Here, PT redeems for the full underlying asset while YT stops earning yield. Any YT token held into maturity goes to zero. This is why YT trading is not passive income. It is a calculated risk trade. I learned that the hard way. I lost $300 in Solstice and Almanak respectively. @teddi_speaks and @ProofOfTravis also took losses on YT-eUSX. When you play with yield markets, just accept that you could ignore significant losses. Just be certain the tradeoff is worth it.