> For the complete documentation index, see [llms.txt](https://docs.strike.fun/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.strike.fun/coming-soon/leveraged-positions.md).

# Leveraged Positions

> **Status: Coming Soon** — This feature is in the design phase.

## Overview

Strike will support **leveraged binary positions** on short-duration markets (e.g. 5-minute BTC/USD), allowing traders to amplify their exposure without needing more capital upfront.

Leverage is backed by a **protocol liquidity vault** — similar to how HLP powers Hyperliquid or JLP powers Jupiter. Vault depositors provide the additional collateral for leveraged trades and earn yield from trading fees and trader losses.

## How It Works

### Without Leverage (Current)

A trader buys UP at tick 50 ($0.50):

* Pays **$0.50** per lot
* Wins **$1.00** if UP (2x return on capital)
* Loses **$0.50** if DOWN

### With 3x Leverage

A trader buys UP at tick 50 with 3x:

* Pays **$0.50** per lot (same as before)
* Vault locks an additional **$1.00** per lot as backing
* Wins **$1.50** if UP (the vault contributes the extra $0.50)
* Loses **$0.50** if DOWN (vault keeps its locked capital + collects a premium)

The trader's risk/reward is amplified, but max loss is still capped at their collateral — no liquidations.

### Why Binary Markets Make This Simple

Unlike perpetual futures where leverage can lead to cascading liquidations:

* **Bounded outcomes** — binary markets resolve to 0 or 1. The vault's maximum liability per lot is known at order time
* **Short duration** — capital is locked for minutes, not indefinitely. Vault utilization turns over rapidly
* **No funding rates** — positions expire naturally, no need for continuous balancing

## The Strike Liquidity Vault (SLV)

### For Depositors

* Deposit USDT into the SLV, receive SLV LP tokens
* Earn yield from:
  * **Leverage premiums** — fees charged on leveraged positions
  * **Trader losses** — when leveraged traders lose, the vault keeps their collateral plus the unlocked backing
  * **Trading fees** — share of protocol fees
* Withdraw anytime (subject to utilization — if vault capital is locked in active markets, withdrawals may be partially delayed until markets resolve)

### For Traders

* Select leverage multiplier (2x, 3x, 5x, 10x) when placing an order
* Pay a **leverage premium** on top of the standard trading fee — scales with multiplier and vault utilization
* Max loss is always your collateral — no liquidation risk
* Payouts are automatically calculated and settled at market resolution

## Vault Risk Management

The vault has built-in safeguards:

| Parameter                         | Purpose                                                                                                   |
| --------------------------------- | --------------------------------------------------------------------------------------------------------- |
| **Max leverage**                  | Per-market cap (e.g. 10x) based on market type and duration                                               |
| **Max vault exposure per market** | Limits how much of the vault can be locked in a single market                                             |
| **Utilization-based pricing**     | Leverage premium increases as vault utilization rises — naturally throttles demand when capital is scarce |
| **Diversification**               | Vault exposure is spread across many concurrent 5-minute markets — individual market outcomes average out |

### Why The Vault Wins Long-Term

Short-duration binary markets have a statistical edge for the house:

* Retail traders tend to lose more than they win on rapid directional bets
* The leverage premium provides guaranteed income regardless of outcomes
* High turnover (5-minute cycles) means the law of large numbers kicks in fast
* Vault is diversified across many concurrent markets — variance is smoothed

This is the same dynamic that makes HLP consistently profitable on Hyperliquid.

## Premium Pricing

The leverage premium can be structured in different ways:

**Option A — Fixed fee per multiplier:**

| Leverage | Premium        |
| -------- | -------------- |
| 2x       | 1% of position |
| 3x       | 2%             |
| 5x       | 4%             |
| 10x      | 8%             |

Simple, predictable for traders.

**Option B — Dynamic (utilization-based):**

Premium scales with vault utilization — cheap when the vault is idle, expensive when heavily utilized. Similar to Aave/Compound interest rate curves.

```
premium = baseFee × leverage × utilizationMultiplier
```

More capital-efficient, but less predictable for traders.

## Example Scenario

**Market:** BTC above $84,500 in 5 minutes? (tick 50 = $0.50)

| Trader | Action   | Leverage | Pays | Vault Locks | If UP Wins | If DOWN Wins |
| ------ | -------- | -------- | ---- | ----------- | ---------- | ------------ |
| Alice  | Buy UP   | 1x       | $50  | $0          | +$50       | -$50         |
| Bob    | Buy UP   | 3x       | $50  | $100        | +$100      | -$50         |
| Carol  | Buy DOWN | 5x       | $50  | $200        | -$50       | +$200        |

* Bob pays a 2% premium ($1) for 3x leverage
* If UP wins: Bob gets $150 ($50 collateral + $100 from vault). Vault is down $100 on Bob but keeps Carol's $50 + $200 locked backing
* Net vault P\&L depends on aggregate outcomes across all traders and markets

## Comparison

|                  | Strike Leveraged        | Perp DEX (Hyperliquid)   | Binary Options (traditional) |
| ---------------- | ----------------------- | ------------------------ | ---------------------------- |
| Max loss         | Collateral only         | Collateral (liquidation) | Collateral only              |
| Liquidation risk | None                    | Yes                      | None                         |
| Duration         | Fixed (5 min)           | Indefinite               | Fixed                        |
| Funding rates    | None                    | Continuous               | None                         |
| Vault model      | SLV (like HLP)          | HLP                      | House/bookmaker              |
| Settlement       | On-chain, deterministic | Mark price               | Often off-chain              |

## Roadmap

* [ ] SLV vault contract (deposit/withdraw/LP tokens)
* [ ] Leverage parameter in order placement
* [ ] Premium pricing model (fixed or dynamic)
* [ ] Vault risk management (exposure caps, utilization curve)
* [ ] Frontend: leverage selector + P\&L preview
* [ ] Backtesting: vault P\&L simulation on historical 5-min data
* [ ] BSC testnet deployment