🚀Leverage

How Pluto Leverage Vault works

User enters position at Leverage Vault by depositing capital and deciding how much asset they want to borrow. The higher the leverage multiplier, the more asset they borrow to increase their position.

Leverage Position

Your leverage position determines how much you can amplify your initial deposit. It’s calculated based on your leverage ratio, which shows how much more you’re borrowing compared to what you originally put in.

$$\begin{align*} LP &= C \times LR \\[0.5em] LR &= \frac{C + D}{C} \\[0.5em] D &= LP - C \end{align*} \\~\\ \begin{align*} LP &: \text{Leverage Position Size} \\ LR &: \text{Leverage Ratio} \\ C &: \text{Collateral in USD} \\ D &: \text{Debt in USD} \end{align*}$$

This setup allows you to boost your potential returns by borrowing more than your initial deposit, but remember—it also means taking on more risk.

Leverage Rate (APY)

Leverage Rate (APY) is the interest rate you pay for borrowing those extra assets to amplify your yield. The idea is to use the borrowed assets wisely to generate more returns than the interest you owe.

For example, let’s say you’re using JLP Leverage, where the base asset has an APY ranging from 30% to 80% in Q2 2024. If you’re leveraging 2x, you’ll roughly double that APY, boosting it to a range of 60% to 160%. However, don’t forget—you’ll need to subtract the borrow rate you owe.

$$\begin{align*} \text{LRate} &= \text{Base APY} \times \text{LR} \\ \end{align*} \\~\\ \begin{align*} \text{LRate} &: \text{Leverage Rate (APY)} \\ \text{Base APY} &: \text{Base Rate (APY) from the leveraged asset} \\ \text{LR} &: \text{Leverage Ratio} \end{align*}$$

Borrow Rate (APY)

We calculate the Borrow APY using the current Utilization Rate (UR) through a formula linked to the APY of Yield-Generating Assets (e.g., JLP or INF). This calculated value is then mapped to Pluto’s multi-linear interest rate curve, which includes specific kinked points that define different interest rates at varying UR levels.

The multi-linear interest rate curve is carefully designed to optimize the balance between risk and reward, maintaining steady liquidity for both borrowers and lenders across all utilization rates.

Profit and Loss (PnL)

The PnL represents the profitability of your position. It’s calculated by multiplying the Position Size by the price difference and then subtracting any associated debt and fees. Essentially, it shows the net gains (or losses) from your leveraged position after accounting for all costs.

Return on Investment (ROI)

ROI gives you a clear percentage view of your position’s profitability relative to the initial deposit (i.e capital) you've provided. It’s calculated by comparing your current PnL against the capital, offering insight into how much your investment has grown (or shrunk) in percentage terms.

24h APY

The 24h APY reflects the daily yield from your leveraged position. It’s calculated by taking the difference between the leveraged APY and the borrow APY, then dividing that by your capital. The result is expressed as a percentage, giving you a quick way to see your position’s performance over the past 24 hours. Keep in mind that this figure is indicative, as it fluctuates regularly with changing market conditions.