Keystone Neutral Fund

Basis and funding carry — stable and sideways markets

Market-neutral relative value fund. Runs either the standard basis trade (long jitoSOL spot + short SOL-PERP) when funding is positive, or the reverse basis trade (long SOL-PERP + short jitoSOL spot) when funding is negative. USDC sits idle when funding is near-zero and below the deployment threshold. The fund always has an active position when spreads are wide enough to justify the risk.

Zero net SOL exposure in all three states. A 50% SOL move produces equal and opposite effects on the two legs regardless of which direction the trade is running.

Yield estimates are not guaranteed. Actual returns depend on funding rate conditions, staking reward rates, and (when reverse basis is live) Kamino KLend borrow rates and fees.

Protocol roles (Neutral only)

Protocol	What it does here
Jupiter Perps	SOL-PERP: short in standard basis, long in reverse basis (PERPHjGBqRHArX4DySjwM6UJHiR3sWAatqfdBS2qQJu).
Jupiter V6	Spot swaps (e.g. USDC ↔ jitoSOL) around deploys and unwinds.
Kamino KLend	Reverse basis only: borrow jitoSOL against USDC collateral in a Kamino obligation (enable_reverse_basis once, then deploy_reverse / close_reverse). Not used in standard basis or for Marginfi-style parking. Program: KLend2g3cP87fffoy8q1mQqGKjrxjC8boSyAYavgmjD.
Marginfi	Optional idle USDC lending / parking paths --- separate integration from Kamino borrow.
Pyth	Oracle inputs for sizing and risk checks.

---

The Two Trade Structures

Standard Basis — when funding is positive (perp at premium to spot):

Long:   500 jitoSOL @ $200 = $100,000  →  ~5.8% APY staking
Short:  500 SOL-PERP @ $200 = $100,000 →  ~5–15% APY funding received

Longs pay shorts every funding period. Fund collects.
Net SOL delta: zero.

Reverse Basis — when funding is negative (perp at discount to spot):

Short:  500 jitoSOL (borrowed from Kamino) = $100,000 sold for USDC collateral
Long:   500 SOL-PERP @ $200 = $100,000 →  ~5–15% APY funding received

Shorts pay longs every funding period. Fund collects.
Net SOL delta: zero.

Both structures are delta-neutral. The fund earns funding regardless of which direction it flows.

---

Automated Position Management

Three states. All transitions are permissionless.

STATE: IDLE — USDC in fund, waiting for deployment threshold
      ↓ settle_funding runs every settle interval
        → records funding rate snapshot in on-chain ring buffer
      ↓ [N consecutive positive periods above threshold]

STATE: BASIS TRADE (long jitoSOL / short SOL-PERP)
deploy_capital (permissionless)
      → USDC split by collateral_bps: portion → Jupiter Perps collateral + SOL-PERP short opened
      → remainder → Jupiter: USDC → jitoSOL (earning staking yield ~5.8%)
      → earning staking yield (~5.8%) + positive funding (~5–15%)
      ↓ [N consecutive negative periods]

emergency_close_position (permissionless)
      → SOL-PERP short closed on Jupiter Perps; USDC collateral returned to fund
      → jitoSOL → USDC via Jupiter
      ↓ [N consecutive negative periods above reverse threshold]

STATE: REVERSE BASIS (long SOL-PERP / short jitoSOL)
deploy_reverse (permissionless)
      → borrows jitoSOL from Kamino; sells for USDC collateral
      → SOL-PERP long opened on Jupiter Perps
      → earning negative funding payments (~5–15%)
      ↓ [funding recovers / near-zero]

close_reverse (permissionless)
      → SOL-PERP long closed
      → jitoSOL borrow repaid on Kamino
      → USDC returned to fund
      ↓ back to IDLE

The fund cycles between states autonomously. No admin intervention required.

---

Protective Controls

NAV Drawdown Guard

Automatically closes the active position if share price falls more than a configurable number of basis points from its all-time high. Configured via nav_drawdown_guard_bps (e.g., 500 = 5% maximum drawdown). Default: disabled (0).

Consecutive Period Gate

Blocks deployment until at least min_positive_periods_to_deploy consecutive snapshots confirm the target direction. Prevents entering a trade into an ambiguous or reversing funding environment. Default: 2 periods required.

Funding Rate Floor

Blocks deploy_capital when the most recent snapshot is below min_funding_rate_to_deploy. Acts as an absolute minimum — spread must be wide enough to justify execution costs. Default: disabled (0).

jitoSOL Parking Mode

When the funding floor blocks deployment, idle capital earns nothing by default. jitoSOL parking mode fixes this: instead of sitting in USDC, the fund swaps idle capital to jitoSOL and earns staking yield (~5–8% APY) while waiting for carry conditions to recover.

How it works:

• Admin sets swap_to_jitosol_when_parking = true via update_fund_params

• When the gate blocks redeployment, the keeper calls park_in_jitosol (permissionless when the flag is set)

• Fund swaps USDC → jitoSOL via Jupiter — capital earns staking yield

• When the funding gate eventually passes, deploy_capital is called with jupiter_account_count = 0 — jitoSOL is already in the fund, skipping the intermediate swap; USDC portion opens the Jupiter Perps short

Funding below floor → park_in_jitosol() → jitoSOL earning staking yield
Funding recovers   → deploy_capital(jupiter_account_count=0) → USDC collateral → Jupiter Perps short opened

This eliminates the zero-yield months that historically dragged Sharpe ratio the most. The fund is always earning something.

---

Risk Management

Volatility-Adjusted Position Sizing

Position size scales with realized volatility at deployment:

Realized Volatility	Position Size (% of Base)
< 2%	150%
2–6%	100%
6–12%	75%
> 12%	50%

Health Factor Monitoring

The fund monitors the Jupiter Perps position health continuously:

Health Factor	Action
> 1.5	Normal operation
1.2–1.5	Reduce position size
< 1.2	Auto-deleverage

Key Risks

Risk	Mitigation
Sustained negative funding (standard basis)	Automated close → reverse basis
Borrow cost exceeds funding (reverse basis)	Reverse basis only deployed when spread covers Kamino borrow rate
NAV drawdown	NAV drawdown guard (configurable)
Liquidation	1x effective leverage + continuous health monitoring
jitoSOL depeg	Circuit breaker on deviation > 2% from fair value
Jupiter Perps smart contract risk	Audited protocol; validate via program ID PERPHjGBqRHArX4DySjwM6UJHiR3sWAatqfdBS2qQJu

---

Permissionless Operations

All fund operations are callable by any wallet. The keeper bot executes them automatically.

Instruction	Trigger Condition	Action
deploy_capital	Idle USDC ≥ 1,000 + funding above gate	Split USDC: collateral portion → Jupiter Perps short; remainder → jitoSOL for staking yield
park_in_jitosol	Funding gate blocking + swap_to_jitosol_when_parking = true	Swap idle USDC → jitoSOL for staking yield while waiting
deploy_reverse	Idle USDC ≥ 1,000 + N consecutive negative periods	Borrow jitoSOL from Kamino + sell for USDC collateral → open SOL-PERP long on Jupiter Perps
settle_funding	Every 4 hours	Read Jupiter Perps position account, compute carry delta, update NAV and high-water mark
adjust_position	Hedge ratio drifts from target	Rebalance short size on Jupiter Perps
emergency_close_position	Negative funding threshold met, or NAV drawdown guard triggered	Close short on Jupiter Perps; USDC returned to fund; swap jitoSOL to USDC
close_reverse	Funding recovers or near-zero	Close long + repay Kamino borrow
unwind_position	Pending withdrawals > 0	Close active position + swap to USDC
claim_withdrawal	After unwind	Transfer USDC to user, close pending withdrawal PDA

---

Deposits

Deposits into the Neutral fund arrive as USDC via Keystone Core. On deployment the fund splits USDC: a portion (controlled by collateral_bps) goes to Jupiter Perps as short collateral, and the remainder is swapped to jitoSOL via Jupiter for staking yield.

Asset	What happens
USDC	Deployed to jitoSOL (standard basis) or held idle (reverse basis / idle mode)

Direct deposits to this fund are not supported. All deposits route through Keystone Core, which handles any LST or SOL conversion to USDC before routing here.

---

Parameters

Parameter	Default	Description
Settle interval	4 hours	Minimum time between settle_funding calls
Min deploy amount	1,000 USDC	Idle USDC threshold for deployment
Max slippage	1%	Maximum swap slippage
Min health factor	1.2x	Auto-deleverage trigger
Target health factor	1.5x	Target Jupiter Perps position health
Max position	90% of NAV	Maximum deployed allocation
Negative funding threshold	-50	Per-period trigger for position close
Max negative periods	2	Consecutive negative periods before close
Auto-close on negative funding	true	Enable automated emergency close
Max funding loss per period	30 bps	Single-period loss trigger for immediate close
NAV drawdown guard	0 (disabled)	Basis points from peak share price to trigger close
Min funding rate to deploy	0 (disabled)	Minimum rate required for deployment
Min positive periods to deploy	2	Consecutive positive periods required before deploying
Swap to jitoSOL when parking	false	Enable permissionless jitoSOL parking mode (earns staking yield when gate is blocking)

Volatility Sizing Parameters

Parameter	Default
Low vol threshold	2%
High vol threshold	6%
Size multiplier: low vol	150%
Size multiplier: normal	100%
Size multiplier: high vol	75%
Size multiplier: extreme	50%

---

Fees: 0.5% management + 20% performance (above high-water mark). Details →