HOWTO Leverage on Kujira FIN

Let's have some fun.

Are you ready to have some fun?

"What is fun?" you ask.

Leveraged positions on @TeamKujira FIN: an HOWTO.

THAT. That is fun! 😊

Okay, before we get started, you need the following:

1. the asset to leverage (I'll explain later)
2. dry powder in the form of $USK
3. guts and smarts

You need the last bit, because leverage entails risk of liquidation, so you have to be smart, prudent, and brave.

On y va.

First of all, what CAN you leverage?

That's a whole can-o'-krill 🍤 conversation, because you CAN leverage anything now with Ghost borrow, but let's not get into that conversation on this 🧵

So, let's talk about what @TeamKujira provides on FIN to leverage.

So, what's on FIN to leverage directly.

These:

$ATOM, $LUNA, $wBNB, $DOT, $wETH.

Which one SHOULD you leverage? Up to you. I'd recommend the token you know the most about. If you know $LUNA really well, it's cycles and quirks, leverage that. Go to town with what YOU know.

For our HOWTO, we're going to leverage $wETH 2xLONG.

@TeamKujira makes this really easy.

1. select 'Isolated Margin'-tab
2. enter amount of collateral in $USK
3. select leverage (I went 2x)
4. acknowledge risk

... 5. note the liquidation price (for later).

And... you're done?

Sure, you're done, if you're only setting up a 2x LONG on $wETH. Select 'Open Long Position' and it shows you your $wETH long position.

YAY! 🎉

Great! You have a leveraged long position on $wETH. Now, all it has to do is go up.

...but what if it doesn't? ...what if it does?

Let's examine each scenario in turn.

Safeguards

What if $wETH doesn't go up, but goes down?

Burn; lowering liquidation point

One thing you can do is to burn part of your long-position by adding $USK to it.

This decreases your position and lowers the liquidation price by, like: a LOT! so move the goalpost, so to speak.

And that totally works.

You're covered.... until you aren't. You should sleep at some point. What happens if $wETH plummets and you're AFK?

Buy-order trigger

An automated approach is to set a buy-order at the liquidation point.

You get liquidated, but then the buy-order captures the $wETH.

The buy-order acts as a (pseudo-)trigger. If you didn't have it, you get liquidated and you get NOTHING! ... not even a Tab nor a Fresca.

With the trigger in place, you get $wETH at that low price-point.

And, the neat thing? When you close your long position, you can cancel the buy-order: you make $USK on the long-close and you get your $USK back from the canceled buy-order.

Either way: you win!

That's how traders set up trades.

Capturing gains

Okay, we looked on the liquidation-side. Now let's look at what happens when $wETH goes up.

You win, right?

Yes-ish? But you have to do something to reap the gains. What do I mean? If $wETH spikes 5x then plummets 10x: you get liquidated and get NOTHING, my friend! NOTHING!

Wait: nothing? Really?

Yes.

Why?

You don't make any money on a long position until you close it. It can go up, down, or sideways, it doesn't matter until either: 1) you get liquidated (and you get NOTHING), or 2) you close it, hopefully, up, hopefully, with gains.

You close the long to capture the gains.

Select 'Close Position.'

Me, I like to wait until I have at least 10% gain.

10% gain on 55 $USK at 2x means I'll've made ~11 $USK, minus fees.

That's pretty sweet for entering a long, waiting for $wETH to go up, then exiting that long.

Closing the long when $wETH goes up is the dream, and that dream happens often enough.

But you snooze: you lose.

How do we automate that process?

That's why I said you need the asset on hand.

To automate (pseudo-)closing the long position when it goes up, I place a sell limit order at 20% above the entry price of the long.

2023-05-02: 0.03127 $wETH, SELL at 2109.32

When $wETH spikes, you sell it at that high price.

That's great! You now have a sell-order trigger.

So, if you close the long, you capture its gains AND cancel the sell-order: you get your $wETH back, along with the $USK-gains.

If you're snoozin', then the sell-order fills, selling $wETH high, AUTOMAGICALLY capturing the gains.

So, that's how you set up a leveraged long position on @TeamKujira FIN, WITH liquidation protection AND an automatic trigger to capture gains.

This way, you hedge against liquidation AND you hedge $wETH skying, capturing its gains, automagically.

SWEET!

There's another way to hedge a leveraged long:

a leveraged short.

TEASER: the next 🧵will be about setting up a leveraged short position on @TeamKujira FIN using Ghost, ... today.

That is, ...if there's interest. If not, I'll just keep that sweet α to myself. 😈