Leveraged Tokens Overview

https://toros.finance/category/leverage

Ethereum: https://toros.finance/?category=Leverage&asset=ETH Bitcoin: https://toros.finance/?category=Leverage&asset=BTC Matic: https://toros.finance/?category=Leverage&asset=MATIC

Toros leveraged tokens are a way for users to gain amplified price exposure to assets on the blockchain. Imagine them as tools that amplify your investment power in the market. The Toros Leveraged vaults automatically take care of managing leverage (borrowed money to enhance investment power) without requiring active involvement from the investor.

Technical Details

These tokens use a combination of complex smart contracts from dHEDGE, AAVE, and 1inch. In simple terms, they have an in-built automated system that adjusts the investments to keep it within a predefined safe range of leverage. This system is designed to maintain what's called a Target Leverage Ratio (TLR), which helps manage the risks associated with leverage backed by collateral.

Directional Upside Power

Toros leverage tokens are best used for short term directional upside. Single direction movements can exceed returns compared to typical perp leverage products. This is because Toros increases leverage as the underlying asset's price increases to maintain the leverage range.

Liquidation Protection

All Toros leverage tokens have built-in protection against downside liquidation. For example, if you had held a typical -2X ETH Short perp from March to May 2021, you would have been liquidated several times over as ETH went up in price. Holding the Toros Ethereum Bear -2X however, would have protected you from liquidation. This is because Toros rebalances on price movements to maintain the leverage range. When a Toros token decreases in value, its leverage also adjusts down to maintain the TLR.

Volatility Decay Risk

In sideways (up-down) markets, Toros vaults can underperform typical leverage products. This is known as Volatility Decay. Toros vaults work similarly to Leveraged ETFs. They maintain a leverage range by rebalancing AAVE debt. Volatility decay occurs through rebalancing, rebalance fees, and debt interest costs. Toros vaults are therefore intended for short term directional bets for best results.

Slippage

When withdrawing, the Toros token price displayed is the last 'best' value based on the Chainlink prices of the underlying assets. Sometimes the inter block Chainlink price diverges from on chain market price of those assets. In this case, when unwinding the leveraged Toros position, the slippage can be higher than expected (amplified by the leverage). We recommend 2-3%, but usually it will be < 1%.