Key features
Last updated
Last updated
Contango positions are built on top of spot and money markets: this liquidity amounts to a total of $60B 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 the 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 the rates by clicking on the 'review trade' button.
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 entry price shown on Contango when opening or modifying a position is the market price at which the base currency is currently trading on the spot market and at which your trade will be executed after you process the necessary approvals. It's marked with a next to it to indicate it's a firm quote from the aggregators that Contango queries. The same occurs when modifying or closing: firm quotes are marked with a indicating the real market price.
The entry price can differ from the mark price shown in the ticket, which is an oracle price: 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.
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.
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.
In the 'Open Position' list Contango displays the exit price, which is also used to compute your PnL. The exit price can have 3 different pricing sources that you can choose from by clicking on the coloured dot next to it:
Money Market Oracle: this is the default option and uses the same oracle as the underlying money market that you're trading on. It is used for liquidation purposes by the money market. For some pairs, however, this is the least accurate source for PnL computations and it can deviate substantially from the market price.
Contango Price Service: this is Contango's own pricing service that queries different price sources, like Balmy and Defillama to provide a more accurate pricing than the Money Market Oracle. If it doesn't find a reliable source it defaults back to what is used to plot charts on the Advance interface.
DEX Spot Market: the actual market price at which your position will be closed in that moment. Sourcing this price requires API calls, which -if too frequent- can lead to the user address being rate-limited, so that's why this option is not displayed as the default one.
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.
Most rewards from the underlying money markets are shown in addition to your PnL, on a second line. If you hover on it, Contango will show the exact quantity of rewards earned. We strive to display all third-party rewards, but that's not always possible depending on the claiming process.
Before trading → make sure to understand how the exit price is computed, what is shown in the PnL breakdown and how money markets behave.
Adding automated orders like stop losses (SL) and take profits (TP) is possible via the Advanced interface, but not the Simplified one; however, any position open under the Simplified page is also visible and editable under the Advanced page. Adding a SL/TP order incurs trading fees as indicated above. Traders also 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.
SL/TP orders are triggered when the oracle price is at +/- 0.01% away from the trigger price on correlated pairs and at +/- 0.05% on non-correlated assets. There is a 20% slippage tolerance to fill an order. E.g. if you set a SL at 1000 on a long position, Contango will do its best to fill it at 1000 but it could go as low as 800. If it less than that, the SL will not be executed and will be cancelled. Currently, keeper bots are run by the Contango team and execution is not guaranteed. The team plans to open source this in the future. Several reasons could lead to an order not being executed:
Price on chain moves too fast and transactions cannot be submitted
Market conditions result in too big slippage and SL/PT can't execute.
Lack of flash loan liquidity
Bot down/error.
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 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 | Lodestar | Morpho | Moonwell | Radiant | Spark | Silo | Dolomite
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.
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.
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!
