Margin Trading

Golden Finance offers leveraged trading opportunities on major trading pairs, providing traders with the ability to trade assets such as ZETA, wBTC and wETH with up to 100x leverage.

Before you open a position...

There are some parameters that you must be familiar with before opening a position, namely:

1. Collateral Management

2. Leverage

3. Trading Pairs

4. Types of Orders

5. Trading Settlement

6. Open Interest Limitations

7. Liquidations

Collateral Management

The collateral management system on Golden Finance is tied to the direction of the trader's positions.

For long trades, collateral is denominated in the respective trading pair's native currency. As an example, collateral for long ETH / USDT trades is denominated in ETH.

Users still enjoy the flexibility to open long trades even if they do not possess the specific assets in their wallet.

For example: A user only has USDT in his wallet and would like to long ETH. By using USDT as collateral, a swap router is employed to automatically convert the user's USDT holdings into the required asset (ETH, in this case) before initiating the trade.

Conversely, collateral for all short trades are denominated in stablecoins irrespective of trading pair. Collateral for short positions are all denominated in stablecoins and settled in USDT.

Leverage

Leverage is the use of borrowed capital to create larger positions in a certain trading pair. Traders trading with 10x leverage are able to open a position of $10,000 with only $1,000 in collateral.

Leverage is enabled by lending out assets in the GLP pool. Hence, traders have to pay a Borrowing Fee when conducting margin trades.

The maximum leverage allowed on Golden Finance is 100x.

PositionLeverage = PositionSize / PositionCollateral

The position collateral will be affected by both asset price movements and borrowing fees. In the event of adverse price movements, the traders leverage on the position will increase beyond the initially used leverage.

This could potentially result in a liquidation.

Trading Pairs

Trading pairs on Golden Finance depends on the composition of GLP comprising of 50% of ZETA, 20% of USDT, 20% of wETH and 10% wBTC.

Consequently, the trading pairs supported are ZETA / USDT, BTC / USDT and ETH / USDT

The available trading pairs are shown on the Trade Page.

Trading Direction & Settlement

Traders can open trades in two directions on Golden Finance.

1. Long Trades that speculate on asset prices increasing through your trading time frame.

2. Short Trades that speculate on asset prices decreasing through your trading time frame.

As mentioned in Market Making with GLP:

• Long Trades: On Golden Finance, long trades, such as long BTC positions, are physically settled. This means that the settlement occurs in the respective asset, for example, BTC.

Trade Example: Long BTC

Parameters:

• Entry Price: $10,000

• Collateral: 1 BTC

• Leverage: 50x

• Reserved Amount: 50 BTC

Upon execution of this trade, 50 BTC will be reserved from GLP. The following scenarios illustrate potential outcomes:

1. Exit Price = $10,100 (+1% price movement)

   • Profit Calculation: 1% * 50x = 50%

   • Result: The trader profits 50%, and 0.5 BTC from the Reserved Amount is paid out to the trader.

2. Exit Price = $9,900 (-1% price movement)

   • Loss Calculation: -1% * 50x = -50%

   • Result: The trader incurs a 50% loss, and 0.5 BTC will be added to the GLP pool.

• Short Trades: In contrast, short trades on Golden Finance are cash-settled. This implies that the settlement for short positions is in USDT.

Trade Example: Short BTC

Parameters:

• Entry Price: $10,000

• Collateral: 1,000 USDT

• Leverage: 50x

• Reserved Amount: 50,000 USDT

Upon execution of this trade, 50,000 USDT will be reserved from GLP. The following scenarios illustrate potential outcomes:

1. Exit Price = $9,900 (-1% price movement)

   • Profit Calculation: 1% * 50x = 50%

   • Result: The trader profits 50%, and 500 USDT from the Reserved Amount is paid out to the trader.

2. Exit Price = $10,100 (+1% price movement)

   • Loss Calculation: -1% * 50x = -50%

   • Result: The trader incurs a 50% loss, and 500 USDT will be added to the KLP pool.

Types of Orders

On the trade page, users can choose to execute 2 different kinds of orders on Golden Finance with each fulfilling different functions.

Market Orders

A market order is an order to long or short an asset at the market's current best available price.

Limit Orders

A limit order on Golden Finance is an order to long or short an asset at a pre-determined price.

However, it's important to note that the execution of limit orders is not guaranteed, and several conditions may prevent their execution.

• The mark price, derived from an aggregate of exchange prices, did not reach the specified price set in the limit order.

• Even if the market price is reached, there may not be sufficient liquidity in the market to execute the order at the desired price

• Executing the order would result in a position that exceeds the current maximum leverage allowed by the platform.

Complex Orders

Complex orders allow users to open a position and set take profits / stop losses (limit orders) in one click. This can be toggled by selecting / keying in your desired exit parameters on the trade page.

Open Interest Limitations

Open interest is the total size of outstanding perpetual positions for an asset that have not been settled i.e. the total size of open trades.

Current open interest and open interest limits can be observed here

Given the settlement mechanism of the GLP pool, traders are free of counterparty risk (i.e. all trades are 100% covered and traders will always be paid out in the event of a windfall).

However, the maximum OI is limited by the protocol's total value locked.

Long OI is limited by the amount of assets staked within the GLP pool.

Short OI is limited by the amount of stablecoins staked within the GLP pool.

Liquidations

A liquidation process is triggered if the asset prices move adversely against the user. In this process, the liquidation contract will automatically close (liquidate) the user's position to prevent further losses.

Users pay a Liquidation Feewhen a liquidation is triggered.

A liquidation is triggered when:

1. PositionCollateral / PositionSize < 0.0067 OR 0.67%

2. PositionLeverage > 150x

PositionLeverage = PositionSize / PositionCollateral

PositionCollateral = Collateral - Losses - Borrowing Fee - Closing Position Fee

PositionSize = PositionCollateral * PositionLeverage

Liquidation Prices are calculated as such:

1. Longs: Liquidation Price = AvgPrice / ( 1 - 0.0067 + 1/RemainingLeverage)

2. Shorts: Liquidation Price = AvgPrice / ( 1 + 0.0067 - 1/RemainingLeverage)

RemainingCollateral = Collateral - Borrowing Fee - ClosingPositionFee

1/RemainingLeverage = RemainingCollateral/PositionSize

The diagrams below illustrate the detailed liquidation logic and the calculation of the liquidation price.

Borrowing fees will cause liquidation prices to change over time. Hence, it is important to monitor your liquidation price.