Margin and Shorts

Margin and Shorting Functionality

Aside from Evo Exchange's unique off-chain/on-chain functionality, "Decentralized Leverage" is another unique feature that allows you to place margin and short orders, just like in centralized exchanges.

How it Works

In order to initiate a margin or short trade you follow very similar steps to placing an order trade, but you enable margin by checking "Enable Margin and Shorts" check box where you normally place trades. Please note that after you place a margin or a short order, you will not be able to disable this checkbox until you have paid back all borrowed funds ("Liabilities").

Once that checkbox is marked, you will be able to place orders larger than your current balance or sell assets short by using funds borrowed from other users on the exchange. You will also notice that your maximum buy/sell amount will be modified to show how much of an asset you are now able to buy or short using margin. Another field that will appear will be your "Portfolio Liquidation Level" which shows how close you are to being liquidated if your "Total Collateral Value" drops below that price.

The "Total Collateral Value" takes into account all of your assets' collateral value held minus your liabilities, in stablecoin value:

Total Collateral Value = (Token Amount in Assets * Token Price * Collateral Multiplier) - (Token Amount in Liabilities * Token Price)

There are different amounts of margin that you can use for different assets you are trading, depending on the perceived risk of that asset at any point in time. This brings us into the two requirements for margin trading. The first one is "Initial Margin Requirement", which is the collateral (i.e. "Total Collateral Value") that you must hold in order to be able to open a margin position of any specific size. The "Initial Margin Requirement" is also what sets the maximum leverage you could use for any specific asset. For example, if the "Initial Margin Requirement" of a specific asset is .2 (20%) that means that you would be able to take up to 5x leverage on that asset. The second one is "Maintenance Margin Requirement", which is the collateral (i.e. "Total Collateral Value" that you must hold in order to be able to maintain a margin position. Each asset's "Maintenance Margin Requirement" is slightly less than than the "Initial Margin Requirement". This gives leeway for an asset's price to drop a little bit (if you are long) and not be liquidated immediately if you bought the asset using all of the margin you have available at the "Initial Margin Requirement". For example, if that same asset that has a .2 "Initial Margin Requirement" and a .1 "Maintenance Margin Requirement" the position allows your leverage to go up to 10x in case the price of a long position falls.

When multiple margin positions are open, we begin to use what we call the "Aggregate Maintenance Margin Requirement". The "Aggregate Maintenance Margin Requirement" is the sum of all of your positions' "Maintenance Margin Requirements". This allows you to have multiple margin positions open from a variety of different assets while your portfolio collateralizes them all.

Your "Total Collateral Value" must always be above the "Aggregate Maintenance Margin Requirement", once it has fallen below that value, your portfolio may begin to be liquidated.

The liquidated assets will be used to repay lenders and fees, all remaining balances will remain in your portfolio.

When using margin or shorts, the user will be required to pay an interest rate on the funds that they have borrowed. The interest payment for each borrowed position will be added to their liabilities automatically on an hourly basis. Please remember that liabilities subtract from the user's "Total Collateral Value" and once that balance is below the "Aggregate Maintenance Margin Requirement" the user may be liquidated.