Leverage & Liquidations
In order to achieve greater trust in DoubleMarket, the protocol will not actively manage users’ margin or perform liquidations. This means that DoubleMarket does not require users to trust yet another blackbox margin engine and liquidation program. All liquidations and margin of positions are handled by existing trading venues, and selection of trading venues is governed by consensus.
As a drawback to this, any positions minted through DoubleMarket must be 100% collateralized to start. Since options have inherent leverage built in, this is a smaller drawback than for spot markets. For example, a user minting a call or put option will only need to contribute the premium amount. Users looking to sell calls or puts would need to post 100% margin. More complex strategies, such as calendar spreads, are also feasible, but would require 100% margin against the risky leg.
| Instrument Type | Margin Required |
|---|---|
| Long Call Option | Premium amount |
| Long Put Option | Premium amount |
| Long Call Spread | Premium amount |
| Long Put Spread | Premium amount |
| Covered Call | 100% margin in coins |
| Short Put | 100% margin in USDC |