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! ๐
Okay, before we get started, you need the following:
- the asset to leverage (I'll explain later)
- dry powder in the form of $USK
- 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 ๐ค conversation, because you CAN leverage anything now with Ghost borrow, but let's not get into that conversation on this ๐งต
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.
- select 'Isolated Margin'-tab
- enter amount of collateral in $USK
- select leverage (I went 2x)
- 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! ๐
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 ๐งตwill 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 ฮฑ to myself. ๐
No comments:
Post a Comment