Create A Leveraged Position

Introduction

Factor Studio enables the creation of leveraged strategies through combining multiple DeFi primitives (see Related Concepts below) into a single transaction:

  1. Supply initial asset token to lending protocol (i.e. Silo, Aave, etc.)

  2. Flash loan debt token from Balancer

  3. Swap flash loaned debt token for asset token on OpenOcean

  4. Add swapped asset token to lending protocol

  5. Borrow debt token from lending protocol to repay flash loan from Balancer

  6. Repay Balancer flash loan using borrowed debt token

By batching the generalized steps above, users get access to up to multiple times leveraged exposure (maximum determined by underlying lending pool) on their initial position. The flash loaned value is added to the position's collateral as asset token while the position incurs interest payments on the debt token equalling the flash loaned value.

This allows users to take either a:

  • Long position (🐂): Supply asset token which you believe will increase in value relative to the debt token thereby amplifying your exposure to any asset gains. For example, by taking a leveraged WETH/USDC position, the value of the debt (i.e. USDC) to the collateral (i.e. WETH) decreases if WETH increases in price relative to USDC.

  • Short position (đŸģ): Borrow debt token which you believe will decrease in value relative to the asset token thereby reducing your debt obligations. For example, by taking a leveraged USDC/WETH position, the value of the debt (i.e. WETH) to the collateral (i.e. USDC) decreases if WETH decreases in price relative to USDC.

Leverage Strategy Explainers

Please refer to the Leverage Strategy Explainer if you would like to understand the leverage process and how Factor streamlines the management of leveraged positions.

Leverage Fees

Factor charges a small transaction-based fee that supports the development of the Factor ecosystem. 50% of the protocol's ongoing revenue is shared with veFCTR holders to encourage greater community governance.

The schedule of fees can be viewed here.

Amplify Your DeFi Gains

Step 1: Select A Leverage Strategy

Navigate to Factor Discover where you will be able to sort and filter through a myriad of Long/Short curated strategies. This includes lending protocols, strategy types, projected APYs, vault protocol rewards, and much more.

Take advantage of Factor Boost (🚀) and Factor Scale (⚖ī¸) incentivized vaults to get even more profits!

Once you have identified your preferred strategy, select the "Open Position" button to get started on your leverage journey.

Step 2: Create a leveraged position

By creating a position, you are configuring the leverage parameters which best suits your personal risk to reward tolerance. Factor enables you to create multiple positions per strategy whose parameters are editable.

The Factor dApp enables you to adjust the following:

  • Stake the position to earn protocol rewards (A): By choosing to stake the newly created position, any liquidity held by the position will be eligible to earn protocol rewards accrued from Factor Scale and Factor Boost.

  • Select initial collateral amount (B): Specify the amount of collateral (i.e. supply/asset token) that will be deposited into the leverage vault. This is the amount of asset tokens which will be debited from your wallet to fund the leveraged position.

  • Select leverage multiplier (C): Specify the amount of leverage that you are willing to take for the position. The higher the leverage, the greater the potential gains OR losses. A 2x leverage means your leveraged position value is twice that of your initial collateral amount.

With the above parameters configured, you can then proceed to create the position by clicking on the "Open Position" button. As your personalized position parameters will be stored on-chain, this will require a signature via your connected web3 wallet (i.e. MetaMask, etc.).

Step 3: Approve leverage contract

With the position created, you will then need to approve a spending amount for the Factor strategy contract. This allows the strategy contract to debit the asset token (i.e. collateral) from your wallet for the purposes of funding the leveraged strategy. This is an on-chain transaction which requires a signature.

Step 4: Add liquidity to your leveraged position

Once approval has been given, you can then start to earn yields by adding liquidity to your newly created position!

By selecting the "Add Leverage" button and signing the transaction request, Factor executes the steps outlined in the Introduction that adds liquidity and therefore leverage to your newly created active position.

Step 5: View your active position

Factor dApp makes it easy for you to view and manage the performance of your leveraged position.

The leverage position dashboard consists of the following metrics:

  • Health Factor: The lower the Health Factor, the higher the likelihood of liquidation with a Health Factor of 1 indicating that the position is at risk of being liquidated.

  • Liquidation Price: The asset token price at which the leveraged position will be exposed to liquidation risks.

  • Projected Yield: The estimated percentage returns which comprising the strategy APY, Factor Boost APY, and Factor Scale APY.

  • Net Value: The USD value the position's collateral minus the position's debt.

  • Position Value: The USD values of the debt amount as well as the asset (i.e. collateral) amount which includes the leveraged portion (i.e. flash loaned value).

  • Supply APY: The yield generated from supplying asset token as collateral to the underlying lending protocol.

  • Borrow APY: The interest owed on the debt token amount which was borrowed from the underlying lending protocol.

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