Risk Assessment: Basis Trading
Strategy class: Basis Trading
Initial deployment: HYPE on Hyperliquid
Initial Venue: Hyperliquid
What is Basis Trading?
Basis trading is a delta-neutral strategy in which Noon buys an asset in the spot market and simultaneously shorts the same quantity through a perpetual contract.
When funding is positive, perpetual longs pay shorts. The strategy earns this funding while the matched spot position offsets most directional price exposure. Hyperliquid settles funding every hour. (Hyperliquid)
For a detailed explanation of the strategy, mechanics and risks, please see the Basis Trading Primer.
Scope of This Assessment
HYPE on Hyperliquid is the initial deployment reviewed under this framework.
The framework is not restricted to HYPE. Noon may use other assets and venues when they meet the same liquidity, funding, execution, custody and risk requirements.
Initial Deployment: HYPE on Hyperliquid
The strategy buys HYPE spot and shorts the same quantity through the HYPE/USDC perpetual on Hyperliquid. Returns come from positive perpetual funding.
HYPE currently provides a strong combination of funding and liquidity. Recent funding averaged approximately 9.84% annualized before fees.
On 22 July 2026, HYPE recorded approximately $72.7 million of spot volume, $407.8 million of perpetual volume and $1.33 billion of perpetual open interest.
Noon Risk Assessment: Summary
Full risk assessment: Google Sheet
Overall risk score: 4.38/5
Noon Risk Assessment: Details
Market Risk
Directional exposure is limited while the spot and short-perpetual quantities remain matched 1:1. Noon monitors net delta and corrects position drift.
Funding is variable and can become negative, causing the short to pay the long. Noon only holds the trade while expected funding remains positive after costs.
Two-leg execution creates temporary directional exposure if one order fills before the other. Noon synchronizes entry and exit orders and caps unmatched exposure.
Volatility Risk
Matched spot and perpetual positions substantially reduce directional PnL volatility when maintained at a 1:1 quantity ratio.
A rapid HYPE rally creates unrealized losses on the short position and can trigger USDC borrowing. Under the current 100% target allocation, stress testing indicates liquidation after approximately a 58% HYPE rally. Noon’s internal 50% margin-ratio guardrail is reached after approximately a 33% rally.
Noon continuously monitors margin ratios and reduces the position well before liquidation. (Hyperliquid)
Credit Risk
The strategy has no conventional corporate borrower or fixed payment obligation. Funding payments are transferred between perpetual longs and shorts.
When HYPE rises, unrealized losses on the short can require borrowing USDC. This introduces variable interest costs and dependence on borrow-market availability. Noon monitors borrowed balances and reduces the position when required.
Liquidity Risk
HYPE has strong liquidity across both markets.
On 22 July 2026, HYPE spot recorded approximately $72.7 million of 24-hour volume. Position limits are based primarily on spot liquidity. Noon aims to keep its position a small fraction of daily volume so it can exit quickly under normal market conditions.
HYPE perpetuals recorded approximately $407.8 million of 24-hour volume and $1.33 billion of open interest.
Counterparty Risk
Hyperliquid is non-custodial and trading activity is recorded onchain, reducing conventional broker and custody risk.
Both legs use the same venue, oracle system, validator set and matching engine. A Hyperliquid failure can therefore affect both positions simultaneously.
Hyperliquid has a shorter operating history than established exchanges and offers limited legal recourse. Noon uses dedicated wallets and independent monitoring.
Smart Contract Risk
Spot and perpetual trading occur natively in HyperCore without external lending protocols, liquidity pools or additional DeFi integrations.
Hyperliquid’s custom L1, bridge and trading infrastructure have received less public scrutiny than older blockchain and exchange infrastructure.
Oracle manipulation, consensus failure, incorrect mark prices or protocol upgrades could cause liquidation or prevent timely exits. (Hyperliquid)
Noon’s Basis Trading Strategy
Noon only opens basis positions in assets with very strong liquidity and consistently attractive funding.
HYPE is the initial asset because it currently satisfies these requirements. Other assets may be used when they pass the same assessment.
Trading Rules: Current View
These rules are designed to be conservative and simple. Noon may update specific operational thresholds as market conditions and available data change, provided the strategy remains within the approved risk framework.
Rule 1 — Asset Selection
An asset must have:
-
Very strong liquidity in both its spot and perpetual markets.
-
Consistently high funding over a representative period.
-
Sufficient market depth for Noon to enter, rebalance and exit efficiently.
-
Reliable pricing, custody and trading infrastructure.
Funding must remain attractive after fees, slippage and any borrowing costs.
Rule 2 — Position Entry and Exit
Noon uses a proprietary execution algorithm to enter and exit positions.
The algorithm places limit orders across both the spot and perpetual markets. This maximizes fee efficiency while maintaining strict delta bounds.
Orders are synchronized and adjusted when necessary to limit temporary unmatched exposure.
Rule 3 — Position Size
The strategy targets a position equal to 100% of the dedicated account value.
Noon maintains the position within the following range:
-
Below 95% of account value: scale the position up toward 100%.
-
Between 95% and 105%: maintain the position.
-
Above 105% of account value: scale the position down toward 100%.
Both legs are adjusted together to preserve the 1:1 quantity hedge.
Rule 4 — Funding
Funding rates and realized funding income are continuously monitored.
If funding deteriorates, Noon may reduce or exit the position. This decision considers current funding, recent funding trends, fees, borrowing costs, liquidity and the expected return from continuing the trade.
Rule 5 — Margin and Borrowing
Noon continuously monitors the portfolio margin ratio, liquidation distance, USDC borrowing and interest costs.
The current internal portfolio margin-ratio guardrail is 50%. Noon reduces the position well before the account approaches liquidation.
Rule 6 — Monitoring and Alerts
Automated monitoring and alerting systems must remain operational while a position is open.
Noon monitors:
-
Net delta.
-
Position size relative to account value.
-
Funding rates and funding income.
-
USDC borrowing and interest costs.
-
Portfolio margin ratio and liquidation distance.
-
Spot and perpetual liquidity.
-
Oracle behaviour and platform health.
If critical monitoring becomes unavailable or a risk limit is approached, Noon may pause entries, reduce the position or exit entirely.
Our Analysts’ Recommendation
Recommendation: Proceed - subject to the trading rules above.
Basis trading provides attractive potential returns while limiting directional exposure through matched spot and perpetual positions.
HYPE is recommended as the initial deployment because it currently meets Noon’s funding and liquidity requirements. The framework gives Noon flexibility to use other suitable assets and venues when they satisfy the same standards.
Let’s Open the Discussion, Noon Community
We propose adding basis trading to Noon’s permitted deployment strategies, initially using HYPE on Hyperliquid and subject to the controls above.
We invite community discussion over the next week. After that, an official vote will be opened for $sNOON holders.
-
Do you support adding basis trading under these conditions?
-
Are the asset-selection and position-management rules sufficiently conservative?
-
Are there additional risks we should consider?
-
Is there anything we may be missing?
Drop your comments below 
Voting Schedules