Traders
Traders are CVI positions holders
The CVI trading model, for now, allows traders to open long positions against the CVI index, the positions are nominated in ETH or a stablecoin. CVI positions can be opened if and only if the available collateral from the liquidity providers is enough to cover the full position risk.
Traders can use the CVI in order to hedge their cryptocurrency holdings against volatility. For example, a trader may have a long position on a portfolio of various top currencies and fears adverse market conditions, and as such, takes a position on the CVI, hedging the value of their overall portfolio (in the case of a market drop, the trader may sustain some loss on their cryptocurrency portfolio but will profit from their CVI position). In that way, the trader essentially buys insurance against adverse conditions.
Another use case for a trader may be that of a trader who needs volatility in their trading strategy in order to profit. Such a trader may want to insure themselves against market stagnation, where no volatility means less profit. In this case, the trader will buy a SHORT position on the CVI.
In both cases, a trader who wishes to take a trade on the CVI needs to not only make a deposit on CVI to cover the size of the trade but must also pay a small usage fee for doing so.
Traders can close their CVI positions at any time.

As a summary, CVI open positions are:

  • Not ERC-20 tokens.
  • Redeemable.

The position data set kept for a trader is:

  • The number of open positions.
  • The timestamp (block height) of the last position change;
  • the trader’s accumulated gain/loss account (can be negative).
If CVI position liquidation value drops below the liquidation threshold, the position is automatically closed. The transaction for position closing is created by an external liquidator. The liquidator receives a position liquidation fee.

Margin Trading:

Margin (or leverage) trading enables the trader to experience the volatility of the CVI multiplied by a factor matching the leverage value. A trader opens a position with leverage of N, which will have the same result as if the trader had placed approximately N times the original amount, and once the position is closed, the matching original debt loan needs to be repaid.
The platform currently supports the main operations of the traders with margin (leverage), meaning that a trader can open a position with a margin higher than 1 (configurable up to 8). This will translate into the user paying an initial open position fee, multiplied by the chosen margin, and in return receiving a position with the amount of position units multiplied by the same margin.
Copy link