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Frequently Used Terms in Lynx
This page offers references to many of the keywords used in Lynx along with their corresponding definitions. This page is geared primarily toward traders and liquidity providers.
The collateral asset is the token traders choose to use as collateral for their trades. On Lynx, it is also interchangeably referred to as a settlement asset because all fees and PnL from trades are 'settled' - or paid - in terms of this asset. For example, a trader using BTC as collateral would earn/pay their PnL and any fees in BTC.
Lynx has the ability to support any settlement asset on its platform.
The market that a trader is going long or short on. For example, if a trader opens a short position on BTC/USD, the traded instrument would be BTC/USD. The traded instrument has no correlation with the collateral asset used, allowing traders to go long or short on BTC/USD using ETH, DAI, or even TKN as collateral.
Note: due to Lynx's use of synthetic exposure, no actual BTC/USD gets traded.
A trader's position size is calculated in the following manner:
For example, a trader opening a long or short position with $1,000 USD collateral and 50x leverage would have a position size of $50,000 USD.
Gross Profit and Loss (Trading PnL) is the percentage that a trader has earned (positive) or lost (negative) on their position due solely to the performance of the traded instrument. It is calculated by simply multiplying the price change of the traded instrument by the amount of leverage used by the trader.
This percentage is measured relative to the position's collateral and does not take any fees into account. To retrieve the absolute gain or loss in terms of the collateral asset (and not in terms of a percentage), we multiply the PnL by the position’s collateral. For an example and detailed view of how Gross PnL is calculated, see here.
Net Profit and Loss (Net PnL) measures how much a trader has earned or lost after accounting for all the fees owed by the trader. Net PnL is expressed as a percentage - either positive or negative - and is measured relative to the trader's collateral before removing the opening fee (ie. what they initially brought to Lynx).
Stop Loss: This parameter dictates the maximum percentage of a trader's collateral that they're willing to lose before their position gets automatically closed. For example, a trader with $1000 of collateral and a stop loss of 50% will have their position automatically closed when their PnL reaches -$500 (a 50% loss in value relative to their initial collateral).
Take Profit: The take profit parameter works similarly to the stop loss but in the upward direction. It dictates the percentage of a trader's collateral that must be earned before their position gets automatically closed. For example, a trader with $1000 of collateral and a take profit of 500% will have their position automatically closed when their PnL reaches +$5000 (a 500% gain in value relative to their initial collateral). Note: While SL/TP are usually thought of as prices, Lynx displays them to users as a percentage. In the backend, these percentages are used to derive a specific price that a tradeable instrument must reach to result in the gain/loss specified in the SL/TP. This is the value recorded and used by the contracts.
lxTKN is the generic term for the receipt tokens that are issued to liquidity providers after depositing assets to any of the liquidity pools. Depending on which pool a liquidity provider deposits into, they might receive lxDAI, lxETH, lxBTC, etc. These lxTKNs represent an LPs share of the pool they deposited liquidity into, and are exchanged for the underlying asset when they go to withdraw their deposited assets.
A funding rate is a periodic payment exchanged between traders intended to help balance open interest across long and short traders to reduce LPs' counterparty risk. Payments are made by traders on the heavier exposed side of each instrument to the traders on the less exposed side of that instrument, incentivizing equal open interest between long and short positions.
If the funding rate is positive, then long position traders are dominant and pay funding to short traders; if the funding rate is negative, then short position traders are dominant and pay funding to long traders.
Pool Utilization refers to the percentage of a liquidity pool that's being occupied across all open positions. For example, if a liquidity pool has $10M in it and $6M are reserved to cover the potential profits of open trades (as determined by the TP set in those trades), the utilization of the pool would be 60%. Pool utilization for each liquidity pool is calculated as: