RAVE Traders
How to RAVE Trade?
Last updated
How to RAVE Trade?
Last updated
Traders have the ability to use any token as collateral to trade perpetual futures through a quanto contract. In order to create a trade, there must be sufficient liquidity in the Liquidity Cave corresponding to the trader's desired collateral. Traders can go long or short on multiple perpetual markets with user-selected leverage (1-200x), and desired collateral asset.
For any RAVE trade, returns are impacted only by movements in the traded perpetual market, not the quanto collateral price. However, trades are settled in units of the collateral token. The traded perpetual market's price change, or performance (%) is used a multiplier. Calculating performance is dependent on whether the trade is a long or short, outlined below. Like performance, leverage also acts as a multiplier in determining profit. These multipliers are applied to a trader's principle amount, or the quanto collateral originally supplied.
Long performance (%) = (current price - open price) / open price
Short performance (%) = (open price - current price) / open price
Given this, a long or short trade's profit, as a percentage, can be determined by the formula below:
The PnL multiplier is applied to a trader's original quantity of tokens deposited and is immediately sent to the trader, thereby settling profit.
In a quanto trade, the price of collateral does not influence calculation of the liquidation price, nor can changes in collateral price trigger a liquidation. RAVE is designed to isolate the liquidation mechanusm from these external factors. This is a unique benefit of quanto contracts compared to traditional linear perpetuals.
Liquidations on RAVE can occur when the traded perpetual market's price movement results in a -90% loss. At trade open, a liquidation price distance is determined by the PnL formula. The liquidation price distance represents how much of a price movement in the desired perpetual market will result in a liquidation. Price distance calculation is also impacted by leverage. The formulas to determine liquidation thresholds are explained below.
Liquidation Price Distance:
Liquidation price distance = open price (quanto collateral * (0.9) - accumulated borrowing fees) / (quanto collateral * leverage)
The liquidation price distance is the price movement needed from the open price to trigger a liquidation. It considers only the percentage of the original position at risk (90%) and the leverage.
A liquidation price is set using the liquidation price distance. Once that price threshold is crossed, the trade can be liquidated by the liquidation bot. Any remaining collateral is passed to the corresponding Liquidity Cave as a liquidation bonus.
Final Liquidation Price:
Long liquidation price = open price - liquidation price distance
Short liquidation price = open price + liquidation price distance
You can view the liquidation price on the RAVE interface before executing a trade.
The trading fee for opening a position is 0.08% of the position size. Similarly, there is a 0.08% fee when closing the position. These fees also apply when increasing the size of an existing position or partially decreasing a position size.
When opening a position, there may be a price impact that affects your entry price. If your position helps balance the long / short ratio of the underlying collateral pool, you will experience zero price impact. If your position imbalances the long/short ratio, your trade will incur a price impact, resulting in a minor adjustment to the entry price.
While a position is open, you may incur borrowing fees in altcoin units depending on your trade position. Traders on the side of the dominant open interest pay borrowing fees that scale with the duration that the trade has been opened for, with individual payouts proportional to the position size and the liquidity pool exposure. Additionally, borrowing rates scale based on liquidity utilization. See Dynamic Borrowing Rates for more information.
Current borrowing fees for the collateral pair can be viewed on the interface before executing a trade.