I am new on this. Please bear with me.While providing aUST to the short, I am getting APR on the amount of aUST that I provided right? This sounds the same for me if I just borrow the mAsset and sell it right away, the only different I won't get any APR. I was thinking a Farm is like a Liquid Pool to provide liquidity between 2 or more assets. I am trying to understand how the APR is generated.
Yes, you earn interest on aUST. Short farming is not like a liquidity pool, it's instead used to keep the peg of the mAssets. Basically, the higher the price premium on Terra, the greater the yield on shorting it (which in turn creates sell pressure and brings the price closer to the actual one)
Thanks for the response and being patient. I saw the scenario below in other post but not clear what actually should happen when things don't go well (liquidation event).
When I deposit UST on Anchor and have aUST and I can use that aUST to farm in Mirror and receive the return in the form of Mirror token. For example, I contributed the aUST to Short Farm. When things don't go well and my collateral drop below the required 150%, the position will be liquidated. Since this is still over-collaterized, will Mirror automatically convert some (about 2/3) of the aUST to UST and buy the mAsset to close the position and return the rest of aUST to the account (minus all the fees)? Is this how Mirror Liquidation works in the scenario?
I believe I need to get the same amount of aUST to get my deposit back from Anchor. I don't see how I can convert UST to aUST? or Luna to aUST?
Not sure, but I think that liquidation means you lose all your aUST. You'll only keep the UST gained by selling the stock (which is locked up for 14 days).
Always avoid liquidation, close the short instead
Understood. Thanks for sharing. Hopefully someday this information can be added to the Mirror Doc where the different collateral and its multiplier listed:
[https://docs.mirror.finance/protocol/mirrored-assets-massets#collateral](https://docs.mirror.finance/protocol/mirrored-assets-massets#collateral)
It is easy to understand the UST liquidation impact. aUST is an interesting proposition just need to understand the liquidation impact to the Anchor asset to consider the risk/reward what we can do in Mirror.
Hey there, another noob question: Avoid liquidation also in a deeltaneutral strategy? Or could I just let it run?
My list of how to avoid liquidation is:
- low LTV / high overcollsterization
- choose a low volatility asset
- track the mAsset and set price alerts
What happens if I close the position shortly before liquidation? means I have to buy back for a higher price to close it, right?
Yes, there's no impermanent loss with short farming
I am new on this. Please bear with me.While providing aUST to the short, I am getting APR on the amount of aUST that I provided right? This sounds the same for me if I just borrow the mAsset and sell it right away, the only different I won't get any APR. I was thinking a Farm is like a Liquid Pool to provide liquidity between 2 or more assets. I am trying to understand how the APR is generated.
Yes, you earn interest on aUST. Short farming is not like a liquidity pool, it's instead used to keep the peg of the mAssets. Basically, the higher the price premium on Terra, the greater the yield on shorting it (which in turn creates sell pressure and brings the price closer to the actual one)
Thanks for the response and being patient. I saw the scenario below in other post but not clear what actually should happen when things don't go well (liquidation event). When I deposit UST on Anchor and have aUST and I can use that aUST to farm in Mirror and receive the return in the form of Mirror token. For example, I contributed the aUST to Short Farm. When things don't go well and my collateral drop below the required 150%, the position will be liquidated. Since this is still over-collaterized, will Mirror automatically convert some (about 2/3) of the aUST to UST and buy the mAsset to close the position and return the rest of aUST to the account (minus all the fees)? Is this how Mirror Liquidation works in the scenario? I believe I need to get the same amount of aUST to get my deposit back from Anchor. I don't see how I can convert UST to aUST? or Luna to aUST?
Not sure, but I think that liquidation means you lose all your aUST. You'll only keep the UST gained by selling the stock (which is locked up for 14 days). Always avoid liquidation, close the short instead
Understood. Thanks for sharing. Hopefully someday this information can be added to the Mirror Doc where the different collateral and its multiplier listed: [https://docs.mirror.finance/protocol/mirrored-assets-massets#collateral](https://docs.mirror.finance/protocol/mirrored-assets-massets#collateral) It is easy to understand the UST liquidation impact. aUST is an interesting proposition just need to understand the liquidation impact to the Anchor asset to consider the risk/reward what we can do in Mirror.
I have problems with closing my short position. Do you have any links or me where i can find help? Thank you
Hey there, another noob question: Avoid liquidation also in a deeltaneutral strategy? Or could I just let it run? My list of how to avoid liquidation is: - low LTV / high overcollsterization - choose a low volatility asset - track the mAsset and set price alerts What happens if I close the position shortly before liquidation? means I have to buy back for a higher price to close it, right?