Position Settlement

Calculation Formula

The settlement amount is calculated as follows:

Settlement Amount (in tokens) = (Collateral USD Value + PnL USD Value) / Current Asset Price

Where:

  • Collateral USD Value = Initial collateral amount × asset price at entry

  • PnL USD Value = Current position value - Entry position value

  • Current Asset Price = Current USD price of the asset

Example Scenarios

Long Position Example

Setup:

  • Asset: ADA

  • Entry Price: $0.50

  • Current Price: $0.60

  • Collateral Deposited: 1,000 ADA

  • Position Size: $2,000 (4,000 ADA equivalent at entry)

Calculation:

  1. Collateral USD Value: 1,000 ADA × $0.50 = $500

  2. PnL Calculation (Long):

    • Current position value: 4,000 ADA × $0.60 = $2,400

    • Entry position value: 4,000 ADA × $0.50 = $2,000

    • PnL: $2,400 - $2,000 = +$400 profit

  3. Total USD Value: $500 (collateral) + $400 (PnL) = $900

  4. Settlement Amount: $900 ÷ $0.60 = 1,500 ADA

Short Position Example

Setup:

  • Asset: ADA

  • Entry Price: $0.50

  • Current Price: $0.60

  • Collateral Deposited: 1,000 ADA

  • Position Size: $2,000 (4,000 ADA equivalent at entry)

Calculation:

  1. Collateral USD Value: 1,000 ADA × $0.50 = $500

  2. PnL Calculation (Short):

    • Entry position value: 4,000 ADA × $0.50 = $2,000

    • Current position value: 4,000 ADA × $0.60 = $2,400

    • PnL: $2,000 - $2,400 = -$400 loss

  3. Total USD Value: $500 (collateral) + (-$400) (PnL) = $100

  4. Settlement Amount: $100 ÷ $0.60 = 166.67 ADA

Key Points

  • Long positions profit when the asset price increases

  • Short positions profit when the asset price decreases

  • The settlement amount can be less than the original collateral if the position incurred losses

  • All calculations are performed in USD terms before converting back to the asset amount

  • The current market price is used for the final conversion to determine the actual token amount returned

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