Key features

Liquidity and price impact

Contango positions are built on top of spot and money markets: this liquidity amounts to a total of $20B across defi. Deep liquidity means minimal price impact for traders.

Obviously, each instrument listed on Contango has its own specific liquidity, depending on the money market and chain selected by the trader. For instance, ETH/DAI on Aave on mainnet is likely to be highly liquid, whereas a more exotic asset like PTeETH/ETH on Silo on Arbitrum might not be as liquid. The choice of a specific chain and money market is completely up to the trader. Contango is only in charge of sourcing the best spot liquidity to execute the swap that is required to open, modify or close a position (see this section for more details). To achieve this, Contango uses Balmy (ex Mean Finance), which is a meta aggregator of spot markets. Slippage parameters for this swap can be adjusted after clicking the 'review trade' button. After clicking the 'review trade' button, Contango also shows the market impact of your trade on both price and rates.

Before trading → always adjust your slippage parameters and check the underlying liquidity you're trading on, by clicking in the dropdown arrow of the money market you selected; also check the final market impact of your trade on both price and rates by clicking on the 'review trade' button.

Pricing

Contango shows different prices on the UI. The major difference to bear in mind is between oracle and market price: the first uses a decentralised price feed to value an asset; the latter is the real price at which the asset will be traded.

The estimated entry price shown on Contango when opening or modifying a position is the oracle price at which the base currency is currently trading on the spot market, so it's not the final execution price. After you approve spending, Contango updates the entry price (with a ✅ next to it) showing the real market price at which your trade will be executed. The same occurs when modifying or closing: firm quotes are marked with a ✅ indicating the real market price; all the rest are estimated oracle prices. Contango cannot quote the real market price from the start as this would be intensive on the spot API quotes and traders would get rate limited quickly.

The entry price (either estimated or firm quote) can differ from the mark price shown in the ticket, which is also an oracle price: in this case it's the price at which the underlying money market is valuing the base asset. Therefore it's the most accurate measure of how to compute the healthiness and liquidation price of a position. This price is what is used for liquidations - which are indeed performed by the underlying money markets - and it's shown in the 'Open Position' list against the liquidation price. It is also used to estimate the liquidation buffer and the market impact of your trade.

Any market impact value shown when opening, modifying or closing a position is given by the difference between the entry price and the mark price in percentage terms.

Charts show oracle prices too. In order to plot charts, Contango picks the chain where oracles has both the lowest heartbeat and the lowest deviation, so as to make the chart as responsive as possible. This means that the chart is indicative and it’s not specific to the money market you’ve selected. Prices on charts should be seen as mid-market prices, for reference purposes only.

Before trading → always make sure to understand all price values you're seeing on the app, and bear in mind that, by design, oracle prices can have deviations from real market prices.

Fees

Protocol fees: Contango is currently free to use as trading fees have been set to 0 (zero!). Fees might be turned on at a later stage. In that case, they will be collected in the base currency for longs and in the quote currency for shorts.

Automation fees: Adding automated orders like stop losses and take profits also incurs 0 (zero!) fees. Traders just pay a reward to cover gas costs for keepers.

Flash loan fees: Contango sources flash loans from different venues, some are free (like Balancer, Morpho, Aave) and some aren't. Depending on the instrument you're trading, you might pay a flash loan fee. Flash loan fees are always surfaced in the opening ticket, before you place a trade.

Liquidation penalties: a liquidation penalty is a fee paid on the price of the collateral when liquidators purchase it as part of the liquidation process. On Contango, the latter is always carried out by the underlying money market.

Before trading → always review the fees you are paying by looking at the total fees shown in the 'review trade' ticket

Funding rates

Conventions on perp exchanges indicate with funding rate the variable interest rate on the underlying debt. Funding rates are charged periodically, e.g. every 1 or 8 hours.

The variable funding rate on Contango is determined by the difference between the cashflow on the lending and borrowing legs of a position, which you normally see referenced as borrow APY and supply APY on the money market. That’s why it’s also called APY on Contango. It can be positive or negative:

• if it’s positive, it means the trader is receiving money to keep his position opened.

• if it’s negative, it means the trader is paying money to keep his position opened.

In other words, Contango’s APY is equivalent to a funding rate, but its sign is inverted compared to funding rates on other perp venues. Funding rates on Contango are cheaper and less volatile than perp trading venues. Academic research on this topic shows that positions built on Aave are around 3x cheaper and less volatile than Binance and dYdX (full study).

The APY on Contango is accrued as PnL and settled when closing the position.

Note that the APY varies with leverage and with the size of your position: when inputting a bigger size Contango always takes into account its impact on the rates and adjust the displayed APY accordingly, so you know it beforehand. If everyone uses Contango, this feature would prevent traders to flip the rates inadvertently and even dilute the APY excessively. So, even if you wanna place a trade outside of Contango, at least use it to simulate it beforehand.

Please note that APY is different from ROE, the return on equity, which is the same concept but computed on your initial margin. Looking at APY is useful if you need to know your funding when trading directionally on non-correlated pairs, while looking at ROE is useful if you're farming a rate differential on correlated pairs and you want to estimate your expected returns. Check out all the differences in this FAQ.

Before trading → always make sure you understand how much you're paying or receiving by looking at the APY/ROE of the money market you selected; also check on the 'review trade' ticket the final market impact of your trade on the rates.

Rewards, incentives, points

By design, almost any reward or incentive offered by the underlying money market can be accrued by Contango users, simply by trading. These rewards are often in the form of native tokens, like $COMP on Compound pairs, sometimes in the form of chain incentives like $OP on Exactly, or even in the form of plain cash incentives like $USDC on Moonwell.

Recently, the points-farming craze spilled over to Contango, as point-yielding assets were made available on money markets, like sUSDe on Morpho Blue, and as a consequence users started looping on them via Contango.

Bear in mind that:

• Rewards are shown directly with their annualized yield next to each money market's APY (so it's extra yield on top of that APY). These rewards are not auto-compounded by Contango: they are claimable with the 'rewards' button at the top right of the app.

• Points or confirmed airdrops are marked with the 🪂 icon next to each pair. Hover on the icon to see the details of each point accrual or airdrop eligibility criteria. For points farming, Contango created a dedicated subpage on the Strategies interface too.

Before trading → be aware that, regardless of the rewards you want to farm, positions on Contango are built on variable rate markets so the APY can always flip against you and impact negatively on your PnL.

PnL computations

Contango estimates your PnL using oracle prices.

Bear in mind that the implied funding rate of your position (the APY) is accrued as part of your PnL and settled when closing the position, partially or totally.

If you hover on the PnL value in the 'Open Positions' list, you can see a breakdown of its components.

Any reward from the underlying money markets is shown in addition to your PnL, on a second line. If you hover on it, Contango will show the exact quantity of rewards earned.

Before trading → make sure to understand what is shown in the PnL breakdown and how money markets behave.

Automation

Adding automated orders like stop losses (SL) and take profits (TP) is possible via the Trade interface, but not the Strategies one; however, any position open under Strategies is also visible and editable under Trade. Just like regular trading, adding a SL/TP order incurs 0 trading fees. Traders just pay a reward to cover gas costs for keeper bots. This reward is now set to 2 times the gas cost, but can vary from 1 to 10 times. The currency this rewards is charged with depends on the margin posted by the trader:

• If the trader posts margin in the base, then it’s taken from the margin.

• If the trader posts margin in the quote, then it’s taken from the margin by computing it via oracle prices.

When a SL/TP order is triggered and your position is closed, you receive cashflow in the quote currency. Currently, keeper bots are run by the Contango team and execution is not guaranteed. The team plans to open source this in the future.

Before trading → always make sure to have a stop loss in place to protect yourself from unexpected liquidations, unless you plan to monitor your position frequently.

Liquidations

Liquidations can happen for several reasons, mostly related to:

• Price movements: price goes against you, your margin loses value and your position goes underwater.

• Funding rates changes: rates move against you, eat into your profits and your position goes underwater.

Given the architecture of the protocol, all liquidations are carried out by the underlying money markets, not on Contango.

On Contango, the reference price used for liquidations is the mark price, which is the ongoing oracle price used by the underlying money markets. This could be different from the price shown on the charts. In order to plot charts Contango picks the chain where Chainlink has both the lowest heartbeat and the lowest deviation, so as to make the chart as responsive as possible. This means that the chart is indicative and it’s not specific to the selected money market. Prices on charts should be seen as mid-market prices, for reference purposes only.

Just like with some money markets where there is a distinction between max LTV ratios and liquidation thresholds, on Contango there’s a max leverage to open a position and a higher leverage threshold at which traders get liquidated.

Money market might have different liquidation penalty. The liquidation penalty is a fee paid on the price of assets of the collateral when liquidators purchase it as part of the liquidation process.

Before trading → always make sure you understand the risks of liquidations and monitor your position health by looking at your liquidation price and minimum margin; also check the details of how the liquidation process work for each money market:

Aave v3 | Aave v2 | Compound v2 |Exactly |Granary | Lodestar | Morpho | Moonwell | Radiant | Spark | Sonne | Silo

Margin in any currency

On Contango you don't have a USD account to fund like in other trading apps: you just connect your wallet and you're ready to trade. No need to deposit anything!

Each pair listed on Contango has a base and a quote asset.

When opening or modifying a positions, traders can post margin in either base, quote, or any of the available currencies in the ticket dropdown. If you're entering with a currency that is not the base or the quote, you might experience higher market impact as more swaps are needed to build the position. If the UI fails to quote you a price, try to swap beforehand and then enter with either the base or quote currency.

When closing, you can also choose the cashflow currency you want to exit to, by browsing the same dropdown.

Before trading → always make sure that you understand the implications of entering with currencies that differ from the base or quote assets.

Multiple positions on the same pair and direction

By default, if you open a new position on the same instrument of an existing position, Contango will add it to your existing position.

However, if you check the force open option at the bottom of the 'review ticket', you can open a new separate position on the same pair and direction as the existing one. For instance, you can have two ETH/DAI longs opened at the same time. Each position is independent from the other. Also, opening a short on ETH/DAI with this option enabled won't offset existing long positions.

As a reminder, all positions are tokenized as an NFT.

Before trading → make sure that you understand how the force open option works.

More than 160 trading pairs

The available instruments currently offered on Contango are determined by the number of assets available on the underlying money market. Exceptions can arise when the assets used for a specific pair are available in isolation mode and/or can't be used as collateral on the underlying money market.

Contango plans to integrate different money markets across multiple chains to expand its pair offering as much as possible.

Before trading → if you have suggestions of new pairs or markets that you would like to see integrated by Contango, please reach out on Discord and let us know! We tend to listen to community request quite often!