Leverage & Margin Trading

Leverage multiplies exposure through margin trading on the CLOB. You post collateral to control a position larger than your margin would normally allow.

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How It Works

	Value
Margin	$100
Leverage	5×
Position Size	$500
Shares at $0.15	3,333 shares

If price = $0.30: +$500 profit (500% ROE) If price ≈ $0.13: Liquidation triggered

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Key Parameters

• Initial Margin (IM): 20% (required to open position)
• Maintenance Margin (MM): 10% (required to keep position open)
• Max Leverage: 10x

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Position Sizing

$\text{Position Size} = \text{Margin} \times \text{Leverage}$ $\text{Shares} = \text{Position Size} / \text{Entry Price}$ Example: $$\$100 \ \text{margin} \times 5 = \$500 \ \text{position}$$ $$\$500 / \$0.15 = 3,333 \ \text{shares}$$

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Liquidation Price

$$\frac{(\text{Entry Price} \times \text{Shares}) - \text{Margin}}{\text{Shares} \times (1 - MM)}$$ Example:

	Value
Entry Price	$0.15
Margin	$100
Shares	3,333
Liq. Price	≈$0.13
Explanation	If the market price ≈$0.13, your equity equals 10% of the position value ($44.39), and liquidation begins.

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Partial Liquidation

Liquidation happens in stages: This prevents complete wipeout on brief volatility.

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Profit & Loss

$$\text{PnL} = (\text{Exit Price} - \text{Entry Price}) \times \text{Shares}$$ Example:

	Value
Exit	$0.30
Entry	$0.15
Shares	3,333
PnL	($0.30 - $0.15) × 3,333 = +$500
ROE	$500 / $100 = 500%

Leverage amplifies both gains and losses proportionally. Example:

	Value
Exit	$0.13
Entry	$0.15
Shares	3,333
PnL	($0.13 - $0.15) × 3,333 = -$67
ROE	-$67 / $100 = -67%