Understanding Liquidation
Similar to Futures Trading, your LONG and SHORT positions on AlphaX can get liquidated as well. To protect our users from getting fully liquidated, we set a liquidation threshold just before the limit line.
Hence, the liquidation takes place at 1.2 threshold to the price floor/ceiling.

Calculating Your Liquidation Threshold

To calculate the liquidation threshold, for LONG tokens, multiply 1.2 to the price floor, while for SHORT tokens, divide the price ceiling by 1.2.
For instance, ETH-1500 will be liquidated when the ETH price decreases to $1,800 (or 1.2*1,500). 4500-ETH will be liquidated when the ETH price increases to $3,750 (or 4,500/1.2).

Avoiding Liquidation

You can refer to the Risk Level to see how close your tokens are to the liquidation price. When you are coming close to the liquidation price, you can sell this token back into USDC by clicking Trade to avoid getting liquidated.

What Happen When My Positions are Liquidated?

When liquidation takes place, the destroyed tokens will be marked and cannot be used to redeem in a normal redeeming process. Instead, these destroyed tokens will be present in the ‘Graveyard’ section on AlphaX where liquidators can come to liquidate and make a profit. Read more here.

How to Claim Dead Strike Tokens

See here to learn how to claim your dead Strike Tokens.

Example of Liquidation Taking Place

The Story of Oscar and Alex 🧑‍🤝‍🧑
ETH price drops to $1,800, resulting in every ETH-1500 tokens on the market becoming marked as LIQUIDATED, because liquidation happens when price floor/ceiling reaches 1.2 threshold. Unfortunately, Oscar was also one of the holders of ETH-1500 who got liquidated.
These LIQUIDATED tokens now are shown on the Graveyard section. AlphaX algorithm will generate replicas of dead ETH-1500 tokens for liquidators to buy at a 6% discount.
With his brilliance, Alex saw this profit opportunity through the liquidation process. To begin he needs 1 SHORT token to pair up with ETH-1500.
He started by:
  1. 1.
    Bought 1 3000-ETH from Trader Joe at the price of $1,200 at the current ETH price of $1,800
  2. 2.
    Bought 1 ETH-1500 from AlphaX’s Graveyard at 6% discount (costs $282 instead of $300 at ETH = $1,800) Alex’s $282 was then transferred to the Redeem Pool
Alex has spent $1,482 in total. Redeemed the underlying value of his asset pair 3000-ETH and ETH-1500 for 1,500 USDC
  • 3000-ETH token = $1,200 (3000-1800)
  • ETH-1500 token = $300 (1800-1500)
Alex receives $1,500. As a result, he gained $90 from investing $1,482 by becoming a liquidator.
Lastly, due to Alex’s liquidating work, Oscar can come to the Redeem Pool and collect his LIQUIDATED ETH-1500 token for $282 instead of $300.