Long/Short Margin Trading Details Policy
Price Oracle
Price Oracle measures and applies pricing standards related to asset deposit sizes, liquidations based on asset debt ratios, etc. (Different from the pool exchange rate)
With stable tokens, a fixed value ($1.0) is used.
Taking liquidity of assets into consideration, the price of other tokens is determined based on the price of the central exchange, such as Binance, Upbit, Bithumb, Coinone, Huobi, Gateio, etc., and the median of Meshswap's pool exchange ratio (price).
Profit, Cost, Expected Details
The return (%) and borrowing cost (%) of each position are adjusted in real-time based on the state of each pool of assets deposited, acquired, and borrowed.
The maximum expected return on the margin trading is calculated as follows: (return on assets deposited per year + return on assets secured per year - cost of assets borrowed per year). The annual return rate includes both deposit rates and MESH distribution rates, and the annual cost is the cost of assets borrowed by users.
The Yield on Deposit (%) is the expected return from tokens distributed to depositors according to the debt rate of a lending pool.
The MESH Distribution Yield (%) indicates the expected annual return (APR) from the MESH tokens distributed from the pool
Borrowing Cost (%) represents the calculated annual interest expense (APR) payable on borrowing asset.
PNL (Profit and Loss) refers to unrealized returns for open positions. Based on the current price of the token (Price oracle) at the end of the position, PNL is calculated as (My Deposited Asset Value + Reserved Asset Value - Borrowed Asset Value) - Total Principal, actual returns may differ from expected returns depending on liquidity pool conditions and token price.
ROE (Return on Equity) is the percentage return on the total principal invested by the user, and the calculation is as follows. * ROE(%) = (PNL / Total Principal) * 100
The following figures are real-time estimates and may differ from the actual data.
Open Position Policy
Positions can be opened by setting the position multiple according to the dollar value of deposited stable assets. Users will open up positions by borrowing assets in a lending pool with the size of (Value of Deposited Assets in Dollars)*(Multiple of Selected Positions). Users’ investment can be up to three times their deposit.
For long position, assets are borrowed from the same pool of assets as stable assets deposited by users, while for short position, assets are borrowed from a pool of tokens positioned by users. Upon returning the borrowed asset, users must return borrowed assets including accumulated interest based on the current real-time borrowing cost (%) of the leveraged asset. As the position multiplier increases, more assets will be borrowed and therefore more money will be paid.
When margin trading, the borrowed asset is automatically swapped (traded) to open the position. A swap route performs routing between positioning tokens and deposited stable assets, and transaction fees are incurred. Depending on the pool, transaction fees will vary. (When a swap occurs in the MATIC>MESH>USDT path during depositing USDT and positioning MATIC, the transaction commission rate for each MATIC/MESH pool and MESH/USDT pool is applied)
As the transaction size (quantity) increases, the effect on the exchange rate between tokens in the pool increases, resulting in a price difference between the current price and the exchange rate. Multiple runs in small quantities can reduce the impact.
Positions can be opened after excluding the fees incurred during the swap. The size of the transaction may affect the price applied at the time of exchange, so the position opening may not proceed at the user's selected scale with the position multiple. To prevent such an occurrence, deposits are made only within the transaction range (slippage) assigned during swap, and may not be processed if the deposit exceeds the transaction range. (Revert) Check the Expected Details at the bottom for all relevant information before depositing.
The value of deposited assets, borrowed assets, and acquired assets fluctuates continuously, and an liquidation occurs at 90% debt ratio. Debt ratio refers to the ratio of borrowed asset value to asset value in my deposit, please review the debt ratio and the return policy.
Close Position Policy
In case the user requests to close the position, the retained assets that have been deposited in a lending pool (For long position, corresponds to long position tokens; for short positions, corresponds to stable tokens obtained by selling borrowed assets) must be withdrawn, and the assets that have been borrowed first must be returned. If the user has returned all of the assets, the user can withdraw the remaining assets and receive them in his or her wallet.
In the Close tab menu, the user can view the detailed quantity of borrowed assets, the detailed quantity of assets returned to the protocol from their account, and the detailed quantity of assets received back into the wallet after the return has been completed.
When closing the long position, the borrowed assets are withdrawn first by withdrawing the long position tokens being deposited into a lending pool. When a swap occurs during the return process, the assets returned from a user's account to the protocol are returned with the swap fee. When price fluctuations make it impossible to return the entire borrowed assets with long position tokens, additional returns may be made from the assets that were deposited by the user (my assets) when the position was opened.
When closing the short position, the borrowed assets are withdrawn first by withdrawing the stable tokens being deposited into a lending pool. When a swap occurs during the return process, the assets returned from a user's account to the protocol are returned with the swap fee. When price fluctuations make it impossible to return the entire borrowed assets with stable tokens, additional returns may be made from the assets that were deposited by the user (my assets) when the position was opened.
The amount of detailed assets that the user receives in his wallet at the end of the position can be found on the 'You get' page. Losses may occur depending on the price at opening and closing.
Due to the price impact when exchanging, it may not be possible to return all the assets at the end of the position depending on the size of the transaction. As a precautionary measure, withdrawals are made within the transaction range (slippage) set at the time of swap, and transactions may not proceed if it exceeds the range.
Liquidation Policy for Debt Ratio
The user who opens a long/short position will have to pay for the assets they borrow instead of borrowing additional assets to maximize revenue. In real time, costs are included in the borrowed assets, and users can withdraw the assets once they return all the borrowed assets that include costs.
In order to ensure a safe return of the borrowed assets, if the ratio of the value of the borrowed assets to the total value of the user's deposited assets (debt ratio) exceeds 90%, liquidation may be initiated.
Debt ratio is calculated as follows:
For long positions, Debt Rate (%) = (Dollar Value of Borrowed Asset /Dollar Value of My Asset + Dollar Value of Long Position Token)*100
For short positions, Debt Rate (%) = (Dollar Value of Short Position Token/ Dollar Value of My Asset + Dollar Value of Secured Token)*100
Because debt ratios can fluctuate rapidly due to changes in the value of deposited assets or borrowed assets, the user must check the debt ratio regularly to avoid liquidations.
To prevent liquidation, the user must deposit additional assets in multiples of 0x, or return assets in the Close tab.
With liquidations, users receive their remaining assets after returning assets used as deposited assets and saubtracting the liquidation fee of 20%. If swaps occur during the liquidation process, depending on the size of the transaction, the user may not be able to return all of the borrowed assets due to price impacts. Due to the nature of the liquidation, all borrowed assets will be returned as full deposit assets, so it is possible that the user will not be able to receive any assets after an auto-return.
The remaining assets can be received in the [Return History] section after clicking My Deposited Assets’ [Asset Details] button.
Liquidation fees (20%) are used to return lending pool assets that have not been returned as a result of rapid price fluctuations.
Terminology
| Terms | Definition |
|---|---|
Asset | Amount of assets corresponding to positions opened by users. |
My Asset | Deposited assets used to open positions by users. The asset is deposited in a lending pool, and rewards are given based on deposit ratios. |
Borrowed Asset | It refers to the amount of assets borrowed by users from a lending pool. Costs are incurred based on debt ratio (%). |
Acquired Asset | It refers to assets acquired by swapping borrowed assets. Acquired Asset is deposited in a lending pool and rewards are given based on deposit ratios.
|
Entry Price | The price applied to users when opening long/short positions. |
Net Asset | It refers to the asset users can receive after repaying all borrowed assets. |
PNL (Profit and Loss) | The unrealized return on the currently open position. It is calculated on the basis of the gross principal, which includes both the interest on a lending pool as well as the cost of borrowed assets. |
ROE (Return on Equity) | The rate of return (%) compared to a user's total investment. |
Asset Debt Ratio | Refers to the ratio (%) of borrowed assets to total deposited assets.
|
Liquidation Price | Liquidation of the entire current position occurs when the asset debt ratio exceeds 90%. |
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