💸Metals
Metals include Gold and Silver
Types of Fees
| Fee / Incentive | Value |
|---|---|
8 bps for Silver, 6 bps for Gold | |
8 bps for Silver, 6 bps for Gold | |
10%-30% of net PnL, based on long-short skew | |
Targets 15% APR within normal (non-skewed) market conditions, assuming 30% utilization. Goes up or down based on long-short skew imbalance and utilization changes | |
2 bps |
Opening Fee: 0.06- 0.08% * Position Size
Opening fee applies on the total position size of a leveraged trade. An an example, if a trader puts up $100 of collateral at a 30x leverage, then the total position size would be $3,000. The opening fee would be deducted from the position size, i.e $1.8 (0.06% of $3,000). $98.2 is now the collateral value of the trade.
Closing fee: 0.06- 0.08% * Adjusted Position Size
Closing fee applies to the adjusted position size of a leveraged trade, where:
Adjusted Position Size = Total Position Size + Accrued PnL - Accumulated Margin Fee
Most margin-based perpetual protocols deduct closing fee upon opening an order, however the reason why we use the adjusted position size is to help traders save fees when they are in a loss, and protect LPs when traders are in profit. In the above example, if a trader puts up $100 of collateral at a 30x leverage, then the total position size would be $3,000. After deducting the opening fee (and assuming no change in the price of the underlying asset), the leveraged position size with an accumulated margin fee on the position of $10 is $(3000-10) =$2990. Hence, the closing fee is 2990* 0.08% = $2.392.
Fixed Spread: 0.02%
Gold and Silver markets are more volatile than forex markets. To account for this volatility, we charge a 0.02% spread to account for any unfavorable price movements that occur right between a trade order being sent, and it being executed onchain. This spread is only charged upon opening an order.
Dynamic Margin fee
A margin fee applies to the collateral value of a position each block (and is displayed in a hourly format on the website). This is to make sure traders do not borrow most of the vault's capacity, and also leave room for other traders to take part in trading against the vault. It is also dependent on how skewed the positioning is in a particular asset, with a higher fee for traders on the skewed side (eg if skew is 90-10 long-short, longs will pay a higher margin fee). Hence, it is both a risk management measure, as well as a fair parameter that allows for several traders to utilize the platform.
The formula for determining the fee at any moment will be based on several factors. It can be summed up as:
Hourly Margin Fee = Base Fee* [(1/(1- Blended Utilization ratio * Skew Ratio))-1]
Base Fee: A fixed fee that varies per pair based on each pair's volatility. E.g, Base fee for Gold is 0.0025%/hour and Silver is is 0.005% / hour
Blended Utilization= 0.75 *Category Utilization + 0.25* Asset Utilization
Asset Utilization= USDC Borrowed / USDC Limit for the Specific Asset
Category Utilization= USDC Borrowed / USDC Limit for the Defined Category
Long Skew Ratio= Long Open Interest for the specific asset /( Long Open Interest + Short Open Interest for the specific asset)
Example: The open interest on long positions for Silver is $10,000, and open interest for short positions for Silver is $500, while blended limit utilization is 20%, ie 0.2. In this case, the long short ratio is = $10,000 / (10,000 + 500) = 95% long, 5% short. Clearly, we do not want the protocol to always be in this state. Hence, the margin fees paid by longs would be 10.27% annualized (0.12 bps/hour), while shorts would only pay 0.44% annualized (0.005 bps/hour). This makes going long (both for new positions and existing positions) expensive, and urges traders to close out their positions. On the other hand, shorting is cheap! Traders are encouraged to take the opposing view, bringing skew ratio back to healthy levels
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