Rebalancing LP positions is necessary when price moves outside your range or when better opportunities emerge. However, poorly timed rebalancing can crystallize losses and incur unnecessary costs. This guide covers strategies to rebalance efficiently while preserving your yield.
When to Rebalance
- Out of range: Position earning zero fees
- Better opportunities: Higher-yield pools available
- Risk management: Reducing exposure to volatile asset
- Capital efficiency: Tightening range after volatility subsides
Rebalancing Methods
| Method | Gas Cost | Slippage | Best For |
|---|---|---|---|
| Manual (withdraw/deposit) | High | Variable | Full control |
| Position manager (Arrakis, Gamma) | Low | Optimized | Passive LPs |
| Gradual migration | Medium | Low | Large positions |
Key Takeaways
- Don’t rebalance too frequently—costs add up
- Use position managers for automated, gas-efficient rebalancing
- Consider widening ranges instead of constant rebalancing
- Time rebalancing during low-gas periods
- Calculate if potential gains exceed rebalancing costs