Exercise 5: V3 Range Selection and Management

⏰ Time Investment: 45-60 minutes 🎯 Goal: Master Uniswap V3 range selection and active position management

📚 Required Reading Integration 📖 Primary: Lesson 5: Concentrated Liquidity Mastery 📖 Supporting: Lesson 3: Impermanent Loss and Risk Fundamentals

🎯 Phase 1: Range Selection Strategy (20 minutes)

Out-of-Range Decision Framework

Range Selection Strategy Matrix

Range Width Decision Framework

Scenario: ETH/USDC pool, current price $2,000

Exercise 1: Calculate ranges for different strategies

Strategy 1: Full Range (V2 equivalent)

• Lower price: $_____

• Upper price: $_____

• Width: ±_____%

• Efficiency: _____x (similar to V2)

Strategy 2: Wide Range

• Lower price: $_____ (±20%)

• Upper price: $_____ (±20%)

• Width: _____%

• Efficiency: _____x

Strategy 3: Medium Range

• Lower price: $_____ (±10%)

• Upper price: $_____ (±10%)

• Width: _____%

• Efficiency: _____x

Strategy 4: Narrow Range (Advanced)

• Lower price: $_____ (±2%)

• Upper price: $_____ (±2%)

• Width: _____%

• Efficiency: _____x

Risk vs. Efficiency Analysis

For each strategy, assess:

Strategy	Efficiency	Risk Level	Rebalancing Frequency	Best For
Full Range	_____	_____	_____	_____
Wide Range	_____	_____	_____	_____
Medium Range	_____	_____	_____	_____
Narrow Range	_____	_____	_____	_____

Your Choice: Strategy _____ Reasoning: _________________________________

📊 Phase 2: Tick Calculation Practice (15 minutes)

Understanding Ticks

Exercise 2: Convert prices to ticks (simplified)

Current Price: $2,000 ETH/USDC

Price $1,800 (10% below):

• Price ratio: $1,800 ÷ $2,000 = _____

• Approximate tick: _____ (use Uniswap interface for exact)

Price $2,200 (10% above):

• Price ratio: $2,200 ÷ $2,000 = _____

• Approximate tick: _____

Your Range:

• Lower tick: _____

• Upper tick: _____

• Tick spacing: _____ (based on fee tier)

Fee Tier Selection

Exercise 3: Choose appropriate fee tier

Pair: ETH/USDC

• Volatility: High

• Recommended tier: _____%

• Tick spacing: _____

Pair: USDC/USDT

• Volatility: Very Low

• Recommended tier: _____%

• Tick spacing: _____

Pair: wstETH/ETH

• Volatility: Low (correlated)

• Recommended tier: _____%

• Tick spacing: _____

🔄 Phase 3: Position Management (15 minutes)

Out-of-Range Response Protocol

Scenario: Your position goes out of range

Current Position:

• Range: $1,800 - $2,200

• Current price: $2,300 (above upper bound)

• Position: 100% USDC

• Fees earned: $0 (out of range)

Decision Framework:

Option 1: Wait

• Pros: _________________________________

• Cons: _________________________________

• When to use: _________________________________

Option 2: Rebalance

• New range: $_____ - $_____

• Gas cost: $_____

• Expected fees: $_____

• Profitable? _____ (Yes/No)

Option 3: Withdraw

• When appropriate: _________________________________

• Your decision: Option _____

Rebalancing Calculation

Exercise 4: Calculate rebalancing needs

Current Position:

• Range: $1,800 - $2,200

• Current price: $2,100

• Position: 50% ETH, 50% USDC

New Range (centered on $2,100):

• Lower: $_____ (±10%)

• Upper: $_____ (±10%)

Rebalancing Steps:

1. Withdraw old position: Gas $_____

2. Swap to correct ratio: Gas $_____

3. Create new position: Gas $_____

4. Total gas: $_____

Is rebalancing worth it?

• Expected weekly fees: $_____

• Gas cost: $_____

• Break-even time: _____ weeks

• Decision: _____ (Rebalance/Wait)

📈 Phase 4: Fee Collection Strategy (10 minutes)

Fee Collection Timing

Scenario: V3 position on Arbitrum

Position Details:

• Capital: $10,000

• Weekly fees: $10

• Gas to collect: $0.50

Collection Frequency Analysis:

Daily Collection:

• Weekly gas: $0.50 × 7 = $_____

• Net fees: $10 - $_____ = $_____

• Efficient? _____ (Yes/No)

Weekly Collection:

• Weekly gas: $_____

• Net fees: $10 - $_____ = $_____

• Efficient? _____ (Yes/No)

Monthly Collection:

• Monthly gas: $_____

• Monthly fees: $_____

• Net fees: $_____ - $_____ = $_____

• Efficient? _____ (Yes/No)

Optimal Frequency: _____ (Daily/Weekly/Monthly)

🎯 Phase 5: Complete V3 Position Plan (10 minutes)

Your V3 Position Design

Pair: _____ / _____

Range Selection:

• Lower price: $_____

• Upper price: $_____

• Width: ±_____%

• Rationale: _________________________________

Fee Tier: _____% Tick Spacing: _____

Management Plan:

• Monitoring frequency: _____ (Daily/Weekly)

• Rebalancing trigger: Price moves >_____%

• Fee collection: _____ (Daily/Weekly/Monthly)

• Out-of-range response: _____

Risk Limits:

• Maximum IL tolerance: _____%

• Gas cost limit: $_____ per month

• Rebalancing frequency: Max _____ per month

📚 Next Steps

• Set up V3 position on testnet

• Practice range selection with different scenarios

• Monitor a test position for 1 week

• Review Lesson 6 for multi-protocol strategies

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← Back to Lesson 5 | Next: Exercise 6 →