Defituna leveraged liquidity links a range-based pool position to token-denominated debt

Margin, Debt, and Position Size

The setup labels distinguish wallet-funded margin from borrowed tokens, so the position's total size includes capital which carries a repayment obligation.

Wallet-Funded Margin

Initial margin is the contribution from your wallet. At opening, Position Size = Margin + Borrowed Funds, with the amounts expressed on a common value basis. This relationship explains how borrowing enlarges the allocation relative to your contribution. The size display doesn't describe the amount available for withdrawal after settlement. Later price movements, earned fees, and borrowing costs can change the equity remaining in the position.

Repayment in the Borrowed Tokens

Debt represents the assets borrowed for leverage, and repayment uses those same tokens. Their market value can change even if borrowed principal stays unchanged. A dollar-valued debt display therefore reflects token quantities and prices together. The obligation isn't a fixed dollar amount established by the opening preview. Borrow Ratio determines the composition of these liabilities, making it relevant to both exposure and eventual settlement.

Borrow Mix and Directional Exposure

Borrow Ratio sets the borrowed asset mix; the LP's token holdings and selected range determine how those liabilities affect its price exposure.

Appreciation of the Borrowed Asset

A rise in the price of a borrowed token increases the value of that liability. If debt grows in value faster than the LP assets, the equity supporting the position shrinks. This explains why a rising pool price can coincide with declining margin. The borrowing mix determines which appreciation increases your repayment burden. The PnL chart reflects the interaction between the asset side and the tokens owed.

Deposit Composition and the Liquidity Range

The deposit ratio describes how the position allocates tokens across the pool's two sides at the current price. Range placement influences that composition. Borrowing mostly one token can create directional exposure, yet the LP's actual holdings still determine its sensitivity to movement. A range which starts with little exposure to the intended asset can limit the upside associated with the borrowing choice.

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Neutrality Around the Entry Price

A pseudo-delta-neutral setup offsets the LP's initial price sensitivity through its borrowed-token liabilities. That offset requires the appropriate relationship between holdings and debt; balanced borrowing alone doesn't establish it. Trading changes the LP's token composition as price moves, so directional exposure can reappear. Fee income must then cover borrowing costs and price-related losses for the position to finish profitably.

Range Boundaries and Continuing Debt

An out-of-range LP stops earning new swap fees from its allocation, while outstanding borrowing continues to affect its value. Concentrated liquidity changes the position's token composition as price moves through the chosen interval. For a fixed liquidity allocation, moving farther beyond a range edge doesn't change its token quantities. Their market value, the debt's value, and accrued interest can continue changing.

Impermanent loss measures the LP assets' underperformance against holding the deposited tokens outside the pool. Withdrawing liquidity realizes that difference at the exit price. Leveraged exposure and borrowing costs add to the pressure on the remaining equity. Returning to the range can restore fee-earning activity if the position remains open. Merely crossing a range boundary doesn't repay the borrowing or establish a completed closure.

When Does a Leveraged LP Become Eligible for Liquidation?

A leveraged LP becomes eligible for forced closure when its debt makes the position unhealthy under the selected market's debt-to-balance threshold. The SDK's documented unhealthy-position test is debt > balance × threshold, with the configured threshold expressed as a fraction. The comparison uses the program's position balance, so the original wallet deposit isn't a substitute for that value. Market configuration supplies the threshold; the leverage slider alone doesn't specify the full health rule. Eligibility at exact equality is unclear: the liquidation guide includes it, while the SDK documentation uses a strict comparison.

A liquidation price indicates a boundary for the particular setup, not a promised execution price. Solana congestion and available execution liquidity can delay closure. If a full liquidation fails, the system can attempt smaller portions. Partial liquidation therefore concerns execution of an unhealthy position; it doesn't mean the remaining borrowing has disappeared.

Borrowing Costs and Fee Income

Borrowing costs follow the outstanding borrowed assets and the lending vault's interest rate, which responds to utilization. Funding is the borrowing charge paid to the lending vault. A position can therefore face changing interest costs after opening. The length of time the borrowing remains outstanding also affects its accumulated cost. Swap-fee earnings and funding follow different inputs, so a busy trading period doesn't establish a fixed net return.

The Yield (24h) estimate uses trading activity within the selected range over the preceding 24 hours and accounts for leverage. Its fee-income estimate excludes borrowing costs. A projected percentage consequently needs the borrowing charge alongside it to describe net performance. The displayed PnL combines the change in collateral value with yield, then subtracts funding and protocol fees. Pending yield and compounded yield also describe different states of those earnings.

Protocol charges vary by pool and distinguish collateral from borrowed funds. Successful trigger execution and liquidation can add their own charges. Opening also includes a refundable deposit which returns when the position closes. These costs have different calculation bases and payment conditions. A pool's collateral fee alone doesn't describe the charges associated with borrowing, compounding, and exit.

Compounding With or Without Additional Borrowing

Compounding reinvests earned LP fees, and its leverage setting determines whether that reinvestment adds borrowed principal.

Keep Leverage

Keep Leverage compounds the yield together with additional borrowed funds to maintain the leverage setting. The LP grows with both earned capital and new debt. Compounding charges follow the pool's applicable fee structure, including charges on any funds the operation borrows.

Reduce Leverage

Reduce Leverage adds the earned yield as margin without increasing borrowed principal. More margin supports the existing borrowing, lowering leverage and moving any liquidation boundaries farther away. This reinvestment doesn't itself repay the original principal. It changes the relationship between the LP's own capital and its liabilities, while existing interest remains part of settlement.

Debt Repayment and Position Expansion

Repay Debt uses external funds to repay borrowed assets and lower leverage; Increase Position adds collateral while keeping the current leverage. Expanding the allocation at maintained leverage can therefore require more borrowing.

Reducing outstanding debt also removes future interest on the amount repaid. Price movements, protocol charges, and the remaining borrowed assets still influence equity.

Price Triggers and Closure Execution

A Lower Trigger acts when price falls to or below its selected level; an Upper Trigger acts when price reaches or exceeds its level. Both request full LP closure. The manual Close control also allows a reduction in position size. Setting a preferred output token for a trigger describes the intended conversion of the remaining position, while repayment still concerns the borrowed assets. Swap Slippage limits deviations on swaps; Amount Slippage limits deviations when adding or removing liquidity. Exceeding the applicable tolerance reverts the transaction.

Triggers can need multiple execution attempts during network congestion. A fast price move can reach the liquidation boundary before the trigger completes. Trigger and liquidation routing can use Jupiter, with execution still dependent on available liquidity. Completed manual or trigger closure cancels associated trigger orders. Trigger placement doesn't reserve a settlement price or remove the debt while the order waits.

What Happens to Borrowed Tokens When an LP Position Closes?

LP closure uses the position's funds to repay borrowing to the lending pool; any returned remainder comes after debt settlement and applicable charges. The position's gross size therefore isn't the wallet payout. The program can suspend liquidity removal, fee claims, and closing during an emergency. Liquidation can also leave bad debt in the lending vault if the available funds can't cover repayment. A forced close can consume the margin before any tokens return to the wallet.