Examples of unfavorable & favorable leveraged positions

Example of an unfavorable leveraged yield farming position on Alpha Homora V2

Step 1: Supply liquidity

When opening a leveraged position, Alpha Homora V2 allows users to supply any combination of assets. For example, users can supply only USDC, only USDT, only the LP token of Uniswap's USDC-USDT, or a combination of these assets.
Let’s say Henry decides to supply 4,000,000 USDC.

Step 2: Borrow assets

Additionally, Alpha Homora V2 allows users to borrow multiple assets. In this example, Henry can borrow only USDC, only USDT, or a combination of both.
Let’s say Henry selects 7x leverage and borrows 100% in USDC, or 24,000,000 USDC.

Step 3: Read summary before confirming the transaction

As a result of the supplied and borrowed funds, Henry now has 28,000,000 in USDC. If Henry confirms this transaction, Alpha Homora V2 would then optimally swap ~13,300,000 USDC to USDT to ensure Henry has equal value of both assets before supplying the funds to the underlying AMM.
This information is clearly displayed for Henry in the summary section, so he can decide whether to proceed forward.
As you can see, this transaction is not optimal at all since a large amount will be swapped. The “price slippage & trading fees” shown at the bottom also states that this transaction would go through 5.17% price slippage & trading fees.
So what should Henry have done instead? See the next section.

Example of a favorable leveraged yield farming position on Alpha Homora V2

Let’s run through a similar example.

Step 1: Supply liquidity

Henry supplies 4,000,000 USDC.

Step 2: Borrow assets

Henry selects 7x leverage and borrows ~42% in USDC and ~58% in USDT, translating to borrowing 10,000,000 USDC and 14,000,000 USDT.

Step 3: Read summary before confirming the transaction

As a result of the supplied and borrowed funds, Henry now has 14,000,000 in USDC and 14,000,000 in USDT. If Henry confirms this transaction, Alpha Homora V2 would then optimally swap ~6,000 USDC to USDT (since USDC and USDT prices are not exactly 1:1) to ensure Henry has equal value of both assets before supplying the funds to the underlying AMM.
As you can see, this transaction is favorable and preferred over the transaction in the first example. Both the amount to be swapped (6,000 USDC) and the “price slippage & trading fees” (0.0001%) in this second example are significantly lower than those in the first example.
The two examples above show that DeFi users should definitely read all the information shown on the application before confirming the transaction. If there is any unclear information, users should reach out to the project team members to ask for clarification before proceeding.
Last modified 6mo ago