1delta is a protocol that allows traders to use lending liquidity for trading. Traders can create...
Managing Risk and Positions on 1delta
In the past, we wrote an article about how to create a margin position on Aave using the 1delta platform.
We executed a leveraged staking strategy where the assets were not exactly correlated. On top of that, the market was in shock as the SEC postponed the ruling on Bitcoin spot ETFs—this made the whole crypto market drop.
Managing an existing position is as crucial as opening one. In this article, we will show you how you can manage your positions using 1delta.
Let’s take a look at that position (September 5, 2023):
- Overall, the position value remained flat
- Our Collateral dropped by about 3% (~$30) which is unfavorable
- Ou Debt dropped by about 5% (~$30) which is favorable for us
- Our health factor increased to 1.19
This demonstrates that the strategy worked since the short position in WBTC eliminated our losses from our additional long position in MATICX.
1delta allows for a partial closure of a position. One of the motivations to partially close a position could be to reduce the exposure or to allocate the funds to another asset.
In our case, we want to decrease the leverage to reduce the risk of getting liquidated.
To close a position, we open the tab Close in the main input panel and select our two assets in the reverse order.
We then enter the amount we would like to decrease our position by, in our case 10 MATICX, which is about 25% of our current position.
We also need to select at the bottom which asset we would like to buy and repay, in our case WBTC.
To be able to close the position, we have to first approve for withdrawals. To do this, we click on the button Allow withdrawing MATICX and confirm the transaction with our wallet.
As soon as the approval transactions is confirmed, we can execute the trade by clicking the button Decrease Position:
A pop-up window will show the overview of the trade. You can execute the trade by clicking on Confirm Trade and confirm the transaction with your wallet:
You can now see in your Positions table, that the exposure to MATICX and WBTC both decreased:
Close Entire Position
Finally, we want to show you how to close the entire position. Maybe you have found another strategy which yields a higher return.
We again select the assets in the position we want to close, in our case MATICX and WBTC.
To close the whole position, we click on MAX under the bottom input field and the whole position gets selected.
Next we click on Decrease Position, after which the window opens that allows us to confirm the trade.
After clicking on Confirm Trade, the transaction has to be approved in our wallet.
As a result, the positions disappear from the Positions table:
In conclusion, managing risk on the 1delta platform is a multifaceted process that requires careful attention to market dynamics and platform functionalities. The recent market downturn, influenced by the SEC's decision on Bitcoin spot ETFs, tested the robustness of the leveraged staking strategy. Fortunately, the strategy proved effective, with the short position in WBTC offsetting potential losses from the long position in MATICX.
The platform's user-friendly interface facilitates both partial and complete position closures, allowing users to adapt to changing market conditions and optimize their investment strategies. Whether you're looking to reduce exposure, reallocate funds, or explore new investment avenues, 1delta provides the tools and insights needed to navigate the volatile crypto landscape with confidence.
Disclaimer: The content provided in this blog post is for informational purposes only and should not be construed as financial or investment advice. All actions based on this information are taken at your own risk. Past performance is not indicative of future results. Always consult with a professional before making investment decisions. 1delta or its affiliates accept no liability for any direct or indirect losses resulting from the use of this information.