Leverage & margin

Leverage is the ratio between the size of a position and the collateral backing it. A 10x position is one in which the notional exposure is ten times the collateral. Higher leverage amplifies both PnL and the risk of liquidation in the same proportion.

The relationship

Three quantities define a position. Pick any two and the third is implied:

• Collateral — the amount you've deposited (in USD terms at the current oracle price).
• Size — the notional position, also in USD terms.
• Leverage — size divided by collateral.

When opening a position you specify the collateral and either the size or the leverage. The remaining quantity is computed from the other two.

Limits

The minimum exists because at exactly 1x the position has no leverage and a spot trade is more capital efficient. The maximum is set per market based on the asset's volatility and the depth of pool reserves available to back it.

Isolated margin

Every position uses isolated margin. The collateral backing a position is locked to that position and cannot be drawn on by any other position. If the position is liquidated, only that position's collateral is at risk; the rest of your portfolio is untouched.

This is in contrast to cross-margin systems where one trade can drain the collateral of another. Isolation is the right default for a public protocol — it makes the worst case for each position bounded and obvious.

You can hold multiple positions in the same market simultaneously, each with its own collateral, entry price, and liquidation price.

Effective leverage

The leverage you choose at open is the initial leverage. Once the position is open, the effective leverage drifts as the price moves and as fees accrue. PnL is added to (or subtracted from) the collateral, and borrow fees are continuously deducted.

For a long position with collateral C, size S, entry price Pe, and current price Pc:

pnl              = S × (P_c − P_e) / P_e
collateral_now   = C + pnl − fees_accrued
effective_lev    = S / collateral_now

If price moves in your favour, effective leverage drops (you're more solvent than when you opened). If price moves against you, effective leverage rises — and once it crosses the liquidation threshold, the position is closed.

Adjusting a position

You can add collateral to an open position at any time. Adding collateral lowers your effective leverage and pushes the liquidation price further away. The entry price doesn't change.

You can also withdraw collateral, as long as doing so doesn't push the position above its market's maximum leverage. Withdrawing brings the liquidation price closer to the current price.

You cannot change the size of a position without closing and reopening it. Increasing size at a different price would change the entry price; closing and reopening makes that explicit.