# What is Contango? Contango lets you loop anything on-chain. You can: * Create leveraged positions similar to perps, but with low funding. * Lever up on the yield of liquid staking and restaking assets, such as stETH or eETH. * Lever up on the fixed yield of Pendle's PTs. * Create delta neutral plays to farm funding rates. * Arbitrage rate differentials on stablecoins. * Farm rewards, airdrops, and points with leverage. And much more! See all its [use cases](/basics/use-cases). The architecture behind Contango makes it the ultimate [looping](/basics/what-is-looping) layer in defi. Regardless of whether you use the [Advanced](/app/advanced) or the [Simplified](/app/simplified) interface, all positions are built by automating a looping strategy, using spot and money markets. Likewise, regardless of the type of user you are - [trader, looper, farmer](/basics/whos-this-for) - you'll always find a use case to trade on Contango. Here's a 1-min explainer: {% embed url="" %} ## Why is this design superior? #### **You can trade on the deepest liquidity in defi** Contango builds positions on top of [spot](/resources/glossary#spot-market) and [money markets](/resources/glossary#money-market). By aggregating the +$20B liquidity of spot markets and tapping into the +$40B liquidity of money markets, Contango can facilitate large trades with minimal impact on both rates and price. #### **You get the cheapest and least volatile funding rates in crypto** Funding rates (shown as [APY](/resources/glossary#apr) on Contango) are determined by the difference between the lending and borrowing rates on the money markets. This mechanism offers the best funding rates in the industry, around 3x cheaper and less volatile than market leaders, like Binance and dYdX ([full study](https://medium.com/contango-xyz/why-you-should-trade-on-leverage-using-money-markets-93b988fc69ec)). These APY values can be positive or negative, offering traders a chance to collect them via arbitrage. #### You can pick your favourite chain and market Contango is composable by design. It can offer a trading pair on any chain as long as there is a spot and a lending market for that. Currently you can choose among 6 chains, 13 money markets and [more than +200 trading pairs](/basics/key-features#more-than-160-trading-pairs). The ability to trade the same instrument on different markets and chains is great for diversification purposes too. Don't see a money market or an asset you'd love to trade? Just tell us. #### You can farm rewards and points while trading By design, almost all rewards, incentives or points offered by the underlying money markets will be accrued by traders on Contango. Contango already offers point-farming pairs on Ethena, Etherfi, Renzo, EigenLayer, Aave Merit rewards. Airdrop criteria from underlying protocols also apply to Contango traders, like the SPK airdrop from Spark (see [this section](/basics/key-features#rewards-incentives-points) for more details). That’s the beauty of DeFi composability. # Who's this for? ### Loopers Those who have been performing manual or automated "loops" (aka recursive lending and borrowing on money markets) can either opt for the [Advanced](/app/advanced) or the [Simplified](/app/simplified) interface, depending on their needs. In both cases, thanks to easy-to-read metrics (liquidation price, PnL, margin, mark price) they can better manage their position and control their costs. ### Traders Contango's professional [Advanced](/app/advanced) interface is geared towards advance traders, who want to take directional bets on non-correlated assets. Also, given how positions are built on top of money markets, traders can enjoy deep liquidity as well as cheap and [low funding rates](/basics/key-features#funding-rates). Since the pricing model of Contango uses no order book or AMM, traders can also arb prices against other venues. ### Farmers Farmers and newcomers are better off using the [Simplified](/app/simplified) interface directly, as it has a simpler UX flow. They can farm LST and LRT yields, PT yields, USD rates differentials, or simply the rewards offered by the underlying money markets. # Use cases Contango is the ultimate [looping](/basics/what-is-looping) layer for your defi missions. You can loop almost anything on it, either via the [Advanced](/app/advanced) or the [Simplified](/app/simplified) interface. Regardless of the interface you choose, all positions are built by automating a looping strategy, using spot and money markets. A comprehensive trading guide with numerical examples can be found [here](https://medium.com/contango-xyz/the-ultimate-guide-on-how-to-contango-v2-a5489d4ca8a9). Below you can find high level examples of what you can achieve with a few clicks on Contango. ### Go long or short like a perp, at low funding Looping non-correlated pairs like ETH/USDC is identical to trading perps on other venues. But on Contango there are a few perks: * The underlying liquidity is massive: Contango taps into around $20B of liquidity across spot and money markets. * The implied funding rates are the best in the industry: Contango rates are 3x lower and less volatile than market leaders, like Binance and dYdX ([full study](https://medium.com/contango-xyz/why-you-should-trade-on-leverage-using-money-markets-93b988fc69ec)). * You can trade yield-bearing assets as base currency like wstETH instead of plain ETH to gain an extra yield. * You can use [multiple currencies as margin](/basics/key-features#margin-in-any-currency) and you can exit with any of the same currencies. * You can open multiple [independent positions](/basics/key-features#multiple-positions-on-the-same-pair-and-direction) on the same side and pair. * You automatically [farm rewards and points](/basics/key-features#rewards-incentives-points) from underlying money markets. {% hint style="info" %} Recommended interface → [Advanced](/app/advanced) {% endhint %} ### Loop up on LST/LRT pairs The most popular liquid staking and restaking assets, like wstETH or eETH, are available on Contango and can be looped with high leverage. Most of the LRT pairs make you accrue their own loyalty points. too. To open a position you will probably find yourself at home using the Strategies page, where you can find dedicated *ETH Staking* and *MATIC Staking* tabs, with pre-filtered looping options for each assets. However, you might find the Trade interface useful for monitoring purposes. {% hint style="info" %} Recommended interface → [Simplified](/app/simplified) (*ETH Staking* and *MATIC Staking* tab) {% endhint %} ### Loop up on Pendle's PTs Principal Token (PTs) from Pendle represents the principal portion of an underlying yield-bearing asset. Recently, they were made available as collateral on money markets like Silo, Dolomite and Morpho, so users started looping on them manually for extra yield. On Contango you can do that automatically in just 1 click. PT instruments quote PTs against ETH or a stablecoin. Each market offers a different max leverage and liquidity. Read the dedicated [FAQ section](/resources/faq/pt-instruments) to better understand how these instruments work and what are their risks. {% hint style="info" %} Recommended interface → [Simplified](/app/simplified) (*ETH Staking* tab) {% endhint %} ### Farm funding rates Funding rates (shown as [APY](/resources/glossary#apy) on Contango) can be positive or negative; positive means you're getting paid, negative means you're paying. If you open a delta-neutral position on Contango, you can profit by collecting funding rates differentials. Please be aware that bigger and more battle-tested markets like Aave and Compound offer pretty stable funding across time. Smaller and less known markets might have more volatile rates that could spike more often and offer more enticing returns — although for shorter periods of time. To find the best arb opportunities, the [Advance Trade Selection](https://docs.contango.xyz/basics/pages/DABbYqIroio13gmON2LL#id-2.-advance-trade-selection) tool is your best ally. {% hint style="info" %} Recommended interface → [Advanced](/app/advanced) {% endhint %} ### Farm USD rates Similarly to the previous use case, you can farm USD funding rates differentials by using stablecoin pairs, like DAI/USDC. In this case, you don't need to open a delta neutral trade with two positions as both base and quote assets are pegged to the dollar. The [USD Farming tab](https://docs.contango.xyz/basics/pages/1zPQUGSZnSyaDOEmvIWR#id-1.-main-tabs) on the Strategies page already shows you a filtered list of all stablecoin pairs with a minimum liquidity of $1000. {% hint style="info" %} Recommended interface → [Simplified](/app/simplified) (*USD Rates* tab) {% endhint %} ### Farm points, airdrops, rewards on leverage By design, almost all rewards, airdrops or points offered by the underlying money markets will be accrued by traders on Contango. * Rewards: most money markets listed on Contango offer rewards in their native token, or incentives in USDC, OP and ARB. * Points: LST and LRT protocols have partnered with money markets - or Contango directly - to offer points to traders using their assets: point-farming pairs are available for Ethena, Etherfi, Renzo, EigenLayer. Some money markets also offer their own loyalty points: Merit rewards for Aave, Minerals for Dolomite. Check the dedicated [FAQ section](/resources/faq) for details. * Airdrop: any airdrop criteria from underlying protocols also apply to Contango traders, like the SPK airdrop from Spark. To find the best rewards opportunities, the [Advance Trade Selection](https://docs.contango.xyz/basics/pages/DABbYqIroio13gmON2LL#id-2.-advance-trade-selection) tool is your best ally. {% hint style="info" %} Recommended interface → [Advanced](/app/advanced) {% endhint %} # What is looping? Looping has always been the DeFi-native way of longing or shorting assets on-chain. Since the early days of DeFi, users have been manually borrowing, swapping, lending multiple times on [money markets](/resources/glossary#money-market) to achieve a leverage exposure to an asset or farm rewards. In a nutshell, looping involves lending or depositing some capital (e.g. ETH into Aave), borrowing another currency (e.g. DAI) against it, swapping the borrowed amount for the original asset (ETH), and repeating these steps through several loops to gain more exposure to the initial asset — or simply to farm more rewards or rates differentials. Money markets normally require you to be overcollateralized, meaning that you can only borrow less than the value of what you deposit. For instance, if ETH on Aave has a maximum [loan-to-value (LTV)](/resources/glossary#loan-to-value-ratio) ratio of 82.5%, you can only borrow 82.5% of the $ value of the ETH you’ve deposited. That’s why, after 12–15 loops normally you get diminishing returns on the effort you’re putting into looping: the exposure you get to the asset you’re lending increases by smaller and smaller amounts (kudos to Stephen from Defi Dojo for his [brilliant explainer](https://www.youtube.com/watch?v=KBT44I7-A70\&ab_channel=StephenTCG%7CDeFiDojo) and [calculator](https://docs.google.com/spreadsheets/d/15kbod8G8Agl_XIC7i58iAucctLmOUISj2HhNodmt4fI/edit#gid=1152227545)). Let’s see an example with spot ETH = 1000 DAI, and max LTV = 82.5% on the money market.
1st loop: * Deposit 1 ETH * Borrow 825 DAI * Swap 825 DAI for 0.825 ETH * Lend 0.825 ETH * Total ETH exposure: 1.825 ETH 2nd loop: * Borrow 681 DAI * Swap 681 DAI for 0.681 ETH * Lend 0.681 ETH * Total ETH exposure: 2.506 ETH \[…] 14th loop: * Borrow 56 DAI * Swap 56 DAI for 0.056 ETH * Lend 0.056 ETH * Total ETH exposure: 5.45 ETH 15th loop: * Borrow 46 DAI * Swap 46 DAI for 0.046 ETH * Lend 0.046 ETH * Total ETH exposure: 4.97 ETH As you can see, at the 15th loop, the total net ETH exposure (which is already around 5.45 ETH) doesn’t increase by that much anymore (just 0.046 ETH, not even 1%). And gas fees might make the following loop not worth it. Indeed, manual looping is pretty expensive, especially on L1. That’s why manual loops were soon automated via [flash loans](/resources/glossary#flash-loan) by popular dapps. The [next section](/basics/how-does-it-work) explains this mechanism in details. # How does it work? Contango builds positions by automating [looping](/basics/what-is-looping) strategies, through [flash loans](/resources/glossary#flash-loan). When a trader opens a long ETH/DAI position with DAI as margin, the protocol gets the remaining DAI from a flash loan, swaps all DAI for ETH on the spot market, and lends ETH on a money market, to borrow DAI and repay the flash loan.

High level explanation of how Contango synthetizes a long ETH/DAI position

When closing a position, Contango simply undoes the above steps. Please note that currently Contango has integrated with [*variable-rate* markets](/resources/glossary#money-market) (which does not necessarily close the door to integrations with *fixed-rate* markets too). Below is a detailed explanation how Contango builds long and short positions. The following sub-section examines in detail a [real transaction](/basics/how-does-it-work/detailed-tx-analysis). ### Long position #### Quote currency as margin If a trader wants to long ETH with some DAI as margin, Contango will first obtain the remaining DAI with a flash loan, swap all DAI for ETH, lend that ETH on a variable rate market, and borrow DAI against it to reimburses the initial flash loan. The diagram below recaps these steps and provides a numerical example when a trader longs 1 ETH with 200 DAI as margin, and spot ETH = 1000 DAI.

Steps carried out to open a long ETH/DAI position, with DAI as margin

#### Base currency as margin If a trader wants to long ETH with some ETH as margin, Contango will first obtain DAI with a flash loan, swap DAI for ETH, lend that ETH + the ETH posted as margin, and borrow DAI against it to reimburses the initial flash loan. The diagram below recaps these steps and provides a numerical example when a trader longs 1 ETH with 0.2 ETH as margin, and spot ETH = 1000 DAI.

Steps carried out to open a long ETH/DAI position, with ETH as margin

### Short position Short are built slightly different from the above flow. * Effectively, shorts are longs on the inverse contract with a +1 on the leverage. For instance, a 2x ETH/DAI short is like a 3x long on the inverse DAI/ETH contract. This is because you need the full notional exposure on the asset you're shorting for your PnL to be coherent. * A consequence of this is that you always have a liquidation price on Contango, even at 1x leverage. #### Quote currency as margin If a trader wants to short ETH with some DAI as margin, Contango will first obtain the full ETH exposure with a flash loan, swap all ETH for DAI, lend that DAI on a variable rate market, and borrow ETH against it to reimburses the initial flash loan. The diagram below recaps these steps and provides a numerical example when a trader shorts 1 ETH with 200 DAI as margin, and spot ETH = 1000 DAI.

Steps carried out to open a short ETH/DAI position, with DAI as margin

#### Base currency as margin If a trader wants to short ETH with some ETH as margin, Contango will first obtain the full ETH exposure with a flash loan, swap all ETH for DAI, lend that DAI on a variable rate market, and borrow ETH against it to reimburses the initial flash loan. The diagram below recaps these steps and provides a numerical example when a trader shorts 1 ETH with 0.2 ETH as margin, and spot ETH = 1000 DAI.

Steps carried out to open a short ETH/DAI position, with ETH as margin

# Detailed tx analysis Given the architecture behind Contango, it's worth taking a deeper dive into how the steps described in the[ previous section](/basics/how-does-it-work) are batched into a real transaction. Please note: how each transaction is built can vary depending on the asset, money market and chain you trade on. Let’s dig into [this transaction](https://arbiscan.io/tx/0x117e4ce949aea9f65701182272fd5824a4d267d7fa31cc1dc6abab402383d69e), where a trader goes long 0.01 ETH with $6.42 USDC as margin. 1\) $6.42 USDC, the initial margin from the trader, are sent to the Contango vault (to be conceived as an account that the trader has with the protocol). This step is only needed if the trader doesn’t have funds in the vault/account. For instance, existing funds collected from rebates/referrals into this account could cover totally or partially the amount to be sent. The first address in this line is the trader’s address, the second one is the Contango vault.
1) $6.42 USDC, the initial margin from the trader, are sent to the Contango vault (to be conceived as an account that the trader has with the protocol).
2\) The remaining $9.92 USDC are flash borrowed from Aave to the trader’s position (they’ll be used later and swapped for the full 0.01 ETH). The second address is a minimal beacon proxy contract that represents the trader’s position (Contango creates one for every new position).
The remaining $9.92 USDC are flash borrowed from Aave to the trader’s position (they’ll be used later and swapped for the full 0.01 ETH).
3\) $9.92 USDC are transferred from the beacon proxy to the main Contango address.
3) $9.92 USDC are transferred from the beacon proxy to the main Contango address.
4\) The trader’s margin ($6.42 USDC) is also transferred to the main Contango address.
4) The trader’s margin ($6.42 USDC) is also transferred to the main Contango address.
5\) Contango transfers the total of $16.34 USDC to the spot executor, which is responsible for invoking the swap part of the trade (see following steps).
5) Contango transfers the total of $16.34 USDC to the spot executor, which is responsible for invoking the swap part of the trade (see following steps).
6-10) $16.34 USDC are swapped for \~0.01 ETH and transferred to the main Contango address. In this example Paraswap is being used to swap, becasue it was chosen offchain as best spot rate for this transaction. Contango uses a meta aggregator to always route the swap to the best pricing.
6-10) $16.34 USDC are swapped for ~0.01 ETH and transferred to the main Contango address.
11\) Trading fees in the base currency, WETH, are transferred to the Contango treasury account ($0.016, rounded up in the explorer to $0.02).
11) Trading fees in the base currency, WETH, are transferred to the Contango treasury account ($0.016, rounded up in the explorer to $0.02).
12\) Contango transfer the remaining ETH ($16.28) to the proxy account that represents the trader’s position.
12) Contango transfer the remaining ETH ($16.28) to the proxy account that represents the trader’s position.
13\) The position account supplies $16.28 of ETH on Aave to lend it.
13) The position account supplies $16.28 of ETH on Aave to lend it.
14\) Aave mints the corresponding aWETH token (collateral) into the trader’s position account.
14) Aave mints the corresponding aWETH token (collateral) into the trader’s position account.
15\) Aave mints the corresponding vUSDC (debt) into the trader’s position account. This concludes the flash borrow cycle.
15) Aave mints the corresponding vUSDC (debt) into the trader’s position account. This concludes the flash borrow cycle.
Note that these tokens (vUSDC and aWETH) are the tokens that determine the basis rate, meant as the difference between the lending profits (given by aWETH) and the borrowing costs (given by vUSD). 16\) Separately, an [NFT](/resources/glossary#tokenized-nft-position) representing the trader’s position is minted from the Contango account into the trader’s address.
16) Separately, an NFT representing the trader’s position is minted from the Contango account into the trader’s address.
# Key features
Liquidity and price impact/pages/2BVOZUt513BM1mzOv3V9
Pricing/pages/kP42VvbxHot756Emo6t6
Funding rates/pages/EvQW1fMg5lbvmMXKhee4
PnL computations/pages/8Ywa7iI60vIb8UAeI9OL
Fees/pages/HpIPmqJ8Ey6IPi33epia
Automations/pages/HxAuwBjG6wUOlwhmrLzq
Liquidations/pages/9TUN3ZikArBUpZEnaFxV
Margin in any currency/pages/LICP2DrEdylPrhVgONfK
Multiple positions/pages/SU1WVSzkuxYVaF4Nmqn8
More than 300 pairs/pages/bKiTnwMWm2GXkIHn7FVf
Incentives and rewards/pages/VFDxHztvlQuTe5KNHPoe
# Liquidity and price impact 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](/basics/how-does-it-work) 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*. {% hint style="warning" %} **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. {% endhint %} # Pricing Contango shows different prices on the UI. The major difference to bear in mind is between [oracle and market price](/resources/glossary#oracle-vs-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](/resources/glossary#base-and-quote-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 :white\_check\_mark: 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 :white\_check\_mark: indicating the real market price. The entry price can differ from the *mark price* shown in the ticket, which is an [oracle price](/resources/glossary#oracle-vs-market-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](https://docs.contango.xyz/basics/key-features/pages/DABbYqIroio13gmON2LL#id-3.-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 selected money market. Prices on charts should be seen as mid-market prices, for reference purposes only. {% hint style="warning" %} **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. {% endhint %} # 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 money markets. That’s why it’s also called [APY](/resources/glossary#apr) 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](https://medium.com/contango-xyz/why-you-should-trade-on-leverage-using-money-markets-93b988fc69ec)).
APY of an ETH/USDC.e long position on different money markets.

APY of an ETH/USDC.e long position at 2x leverage on different money markets.

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](/resources/glossary#apy), 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](/resources/faq#what-is-the-difference-between-roe-and-apy). {% hint style="warning" %} **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. {% endhint %} # PnL computations ## Pricing source {% hint style="warning" %} On all instruments (besides PTs), the Money market oracle is selected by default to display the PnL/ROE of your positions. To get a more accurate estimated PnL/ROE if you were to close your position now, use the DEX Spot market source. \ Contango UI cannot select the DEX Spot market source by default since it would be too computing intensive and DEX aggregators would start rejecting quote requests. {% endhint %} 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:

Hover on the coloured dot and select your favourite source

1. *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. 2. *Contango Price Service*: this is Contango's own pricing service that queries different price sources, like [Balmy](https://www.balmy.xyz/) and [Defillama](https://defillama.com/) 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](https://docs.contango.xyz/basics/key-features/pages/DABbYqIroio13gmON2LL#id-3.-charts) on the Advance interface. 3. *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. {% hint style="warning" %} **Before trading** → make sure to understand how the *exit price* is computed, what is shown in the PnL breakdown and how [money markets](/resources/glossary#money-market) behave. {% endhint %} ## ROE and APY Both ROE and APY are useful indicators to estimate your profits and costs on a given position. You can always toggle between them in the app (when opening a position, in the *Advance Trade Selection* tool and in the *Open Positions* list).\ \ At a high level: * APY (*annual percentage yield)* is determined by the interest rate difference in notional terms (calculated as a percentage of the notional value of the position) * ROE (return on equity) is the same concept but computed on your initial equity (margin). The APY is determined by the difference between the lending profits and the borrowing cost of a position, which you normally see referenced as *borrow APY* and *supply APY* on money markets. That’s why it’s also called [APY](/resources/glossary#apy) on the Contango UI. The APY is thus the *implied funding rate* of your position, but its sign is inverted compared to funding rates on other perp venues. It's a useful metric to monitor when trading non-correlated pairs (e.g. ETH/USDC). Please note that the APY varies with leverage: the higher the leverage, the worst the APY (as more money has to be borrowed). On a side note, Contango has the cheapest and most stable funding in the space ([source](https://medium.com/contango-xyz/why-you-should-trade-on-leverage-using-money-markets-93b988fc69ec)). On the other hand, ROE is computed on your initial margin and thus offers an insight into the estimated returns you can have on your initial capital. It becomes a useful metric to monitor when doing correlated asset loops (e.g. wstETH/ETH or USDC.e/USDC), as you're not betting on the underlying asset increasing in value, you're just "farming" an interest rate spread. Similarly to the APY, the ROE varies with leverage. # Fees ## **Service fees** Using Contango directly via its smart contracts is free. Trading through the app incurs the following fees: * Correlated pairs: 0.05% (5 bps) on any change of position size. This applies to TP/SL too. * Non-correlated pairs, 0.25% (25 bps) on any change of position size. This applies to TP/SL too. *Correlated* refers to those instruments where the base and quote asset are a flavor of the same currency, e.g. stable pairs like DAI/USDC, ETH derivative pairs like wstETH/ETH or PTeBTC/eBTC, etc. *Non-correlated* refers to those instruments where the base and quote asset are not correlated, and are normally used for directional trading, e.g. ETH/USDC or ETH/BTC. Service fees, as well as any other type of fee, are always displayed upfront in the UI:

You can always check your fees before you submit your trade

Discounts to fees are applied depending on the [XP tier](/tango/tangonomics#f734) of each user. **Migrations**: Currently, Contango doesn't charge fees for migrating a position to a different market. Migrating a position entails closing an existing position and opening a new one on a different market via flash loan; no swaps are needed for migrations. So, depending on the instrument you're trading, you might pay a flash loan fee if this is not provided for free (see section below), but you won't face any swap fees. **Transfers**: [moving the NFT](/resources/faq#how-can-i-move-my-position-to-a-different-wallet) that represents a position to a different address is also free. **Special cases:** positions opened before the [TANGO](/tango/tangonomics) launch will not be charged any closing fees. ## **Automation fees** Beside the above fees, traders pay a reward to cover gas costs for keepers that handle [TP/SL orders](/basics/key-features/automation). ## **Flash loan fees** Contango sources flash loans from different venues, some are free (e.g. 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** On Contango, liquidations are carried out at the level of the underlying money market. A liquidation penalty is a fee paid on the price of the collateral when liquidators purchase it as part of the [liquidation](/basics/key-features#liquidations) process on the lending market. in other words, Contango is not responsible for liquidations nor it collects liquidation fees. {% hint style="warning" %} Liquidations on money markets have very harsh conditions. Monitor your position frequently and avoid liquidation at all costs. {% endhint %} # Automation Adding automated orders like stop losses (SL) and take profits (TP) is possible via the [Advanced](/app/simplified) interface, but not the [Simplified](/app/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](#fees) as indicated in the previous section. 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. For instance, 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: * The price on chain moves too fast and transactions cannot be submitted. * Market conditions result in excessive slippage, preventing SL/PT execution. * Lack of flash loan liquidity. * Bot is down or facing issues. {% hint style="warning" %} **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. {% endhint %} # 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. * 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](/resources/glossary#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](/resources/glossary#loan-to-value-ltv-ratio) and liquidation thresholds, on Contango there’s a max leverage to open a position and a higher leverage threshold at which traders get liquidated. Contango adds around an extra 2.5% liquidation buffer on markets that don't differentiate between max LTV and liquidation threshold. This is meant to spare users from nasty surprises. Money market might have different liquidation penalties. 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. {% hint style="danger" %} Please note that due to Fluid's design, Contango can't properly show a liquidated position on this money market; this is an external UI issue, i.e. liquidations are still possible. You can check your liquidation details [here](https://gov.fluid.io/t/help-finding-liquidation-details/816). {% endhint %} {% hint style="warning" %} **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 in their docs. Liquidations on money markets have very harsh conditions. Monitor your position frequently and avoid liquidation at all costs. {% endhint %} # 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](/resources/glossary#base-and-quote-currency) and a [quote](/resources/glossary#base-and-quote-currency) 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. {% hint style="warning" %} **Before trading** → always make sure that you understand the implications of entering with currencies that differ from the base or quote assets. {% endhint %} # 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.
{% hint style="warning" %} **Before trading** → make sure that you understand how the *force open* option works. {% endhint %} # More than 300 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](https://docs.aave.com/faq/aave-v3-features#isolation-mode) and/or can't be used as collateral on the underlying money market. Given this design, Contango is able to list lots of pairs, across different markets. This benefits traders who can pick a specific instrument (say ETH/USDC.e) among a wide selection of liquidity sources and rates. {% hint style="warning" %} **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](https://discord.gg/x3dync2edA) and let us know! We tend to listen to community request quite often! {% endhint %} # Incentives and rewards
Contango points/pages/QnYt9ontRA0BB6CkrDK1
Third-party rewards/pages/CkreZ6uFwWITV5QzM71z
Incentive layer/pages/pSFtf3K8OiuZfXqXlCoR
# Contango points Contango has an ongoing points system in place since the 24th of January 2024, to incentivize product usage and community engagement. The points system consists of several phases: ## Phase 1 It ran from the 24th of January 2024 until the 27th of March 2024. Its goal was to incentivize product usage by stimulating volumes and open interest, as well as gather product feedback, reward bugs reporting and community content. The total points distributed for this phase were 5,548,359, plus 21,329,416 points for early users of Contango v1 (since 2022) and v2 (since 2023). ## Phase 2 The second phase ran from the 28th of March 2024 until right after TGE, the 4th of November 2024. More Contango supply was allocated to this phase, so that users of the previous phase won’t get diluted. During this phase a fixed amount of 1,000,000 points was distributed per week. Extra points were allocated to bugs reporting on Discord, at the discretion of the Contango team. The formula used to reward trading activity is detailed in this [blog post](https://medium.com/contango-xyz/the-road-to-the-contango-token-launch-8d1a0e6b9f5b). ## Phase 3 Currently, Phase 3 (and the following ones) are rewarding traders with up to 2% of TANGO each year for 3 years. Traders can multiply their points via the [XP system](/tango/tangonomics#id-95ce). More details can be found in [this section](/tango/tangonomics#f734). {% hint style="info" %} Ongoing partnerships with Ether.fi and KelpDAO give an extra 3x points multiplier to related instruments from these protocols. {% endhint %}
# Third-party rewards 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 Silo or 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, or via external interfaces like app.merkl.xyz. We're working towards centralizing the rewards claiming process on Contango; meanwhile a detailed breakdown is displayed on the app for all rewards, with a few tags to explain the source and the claiming venue.

Rewards breakdown shown on the app

* Rewards can be claimed with different frequency depending on the underlying protocol. * 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. {% hint style="info" %} In some cases, Contango is able to detect unclaimed rewards (e.g. on Merkl) and make them available directly through its UI via the 'rewards' button at the top right of the app. {% endhint %} # Incentive layer Contango is the Bloomberg terminal for ongoing rewards in DeFi, as it surfaces all rewards that can be accrued by trading specific assets. This indeed showcased its utility as an incentive layer for many protocols, from lending markets to LRTs issuers or even chains. Instead of incentivizing their own assets or markets indiscriminately, these third-party protocols can direct rewards to specific instruments for a specific amount of time directly on Contango. By incentivising TVL by rewarding open interest on Contango, past experiences have shown that the ROI of these reward campaigns can be extremely efficient: * A chain could incentivize any money markets with a unique grant. E.g. Arbitrum incentivized money markets through $ARB, via an LTIPP grant, and obtained a 426x ROI with sticky TVL ([source](https://x.com/Contango_xyz/status/1828793490223857901)). * A chain could incentivize a specific segment, e.g. only incentivize ETH LSTs and LRTs on any of its money markets. E.g. Optimism incentivized LST/LRT trading though $OP, via the Superfest grant, and obtained a 443x ROI with sticky TVL ([source](https://x.com/Contango_xyz/status/1831332105151828052)). * A money market could incentivize trading on any chain or on a specific chain. E.g. Compound incentivized its Arbitrum markets with $ARB and obtained a 930x ROI with sticky TVL ([source](https://x.com/Contango_xyz/status/1826228318389043634)). * A token issuer could decide to incentivize, with a unique point deal, trading on any money market and chain. E.g. EtherFi, KelpDAO are incentivizing any money market and any chain trading of their assets (e.g. [source](https://x.com/Contango_xyz/status/1836465921096912927)).
For this purpose, a dedicated distributor contract has been developed by the Contango team. It allows any third-party protocol to allocate a given amount of rewards for a specific amount of time, to a specific instrument, side, market and chain. Rewards on this distributor contract can be claimed every hour by Contango users. Third-party protocols can benefit from ad hoc partnerships with Contango to receive a points multipliers in exchange for incentivizing their assets via Contango. Interested protocols can reach out to the Contango team for more details via Discord or Telegram. # Ecosystem
# Risks ### Trading on leverage Trading on leverage carries lots of risks. You can lose all your funds. Bear in mind that your position can be easily liquidated because of sudden price changes and funding rates going against you. Oracle prices are used for liquidations; oracles prices can often deviate from real market prices and make your position eligible for liquidations. {% hint style="warning" %} Liquidations on money markets have very harsh conditions. Monitor your position frequently and avoid liquidation at all costs. {% endhint %} ### **Underlying liquidity** Contango aggregates liquidity from the different money markets it integrates. As a result, traders are exposed to the liquidity of the market they chose to trade on: 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. This aspect should be taken into account when opening and closing a position. Unexpected liquidity crunches are driven by market forces and as such cannot be foreseen nor controlled by Contango. ### Displayed APY/ROE Contango always shows the APY/ROE rates using the underlying protocol data coming from their smart contracts or official APIs. Contango indeed strives to show the most truthful and reliable data for any of its integrations. However, please note even official API sources might not necessarily reflect real on-chain yields: e.g. in the case of Ethena's sUSDe, we've chosen to compute the displayed bearing-yield in a different way (see this [FAQ](/resources/faq#why-is-the-bearing-rate-shown-for-susde-different-from-ethenas-page)). Always DYOR and ask us questions on Discord. ### Smart contract risk Even if fully audited, smart contracts can be hacked and exploited anytime. * Contango has never released unaudited code in production. Each integration with the underlying money markets has been [audited](/resources/contracts-and-audits) one or more times, as well as the core contracts. In addition, contracts are being monitored by Hypernative for ongoing threats. * The Contango team always conducts due diligence on both the contracts and the teams that it integrates, but this is not to be interpreted as a curation process for end users. Contango users should still carry out their own due diligence and assess risks related with each underlying market. * Some contracts that only have *view functions* are unaudited because they are only used by the Contango UI to display rates and other metrics. * Users funds sits in a different proxy per position. Each position is represented by an NFT, which sits in the user's wallet. Only Contango's main contract can interact with proxies and allow the owner of the NFT that is linked to the proxy to act on it. Having special permissions on the NFTs, on a theoretical exploit of the core contracts, user funds could be at risk since it would have permissions to effectively transfer the NFTs. * Contango contracts are still upgradeable and under the Contango team control (see Multisig risk below). * Also bear in mind that, when trading on Contango, you expose yourself to several layers of smart contracts risks. For instance, if you trade PTeETH/ETH on Contango via Silo, you exposure yourself to the following smart contract risks: Pendle, Silo, Contango. You also have exposure to Etherfi smart contract risk since you're trading eETH, just like if you were trading DAI you would be exposed to MakerDAO's risk. ### Multisig risk Please note that, at this stage, Contango is not yet a fully decentralized and immutable protocol. Core team members can upgrade the smart contracts via a 3 out of 5 multisig, but a 3-day time-lock is in place. Also, the team is [fully doxxed](https://www.linkedin.com/company/contango-protocol) and supported by reputable [investors and angels](/basics/ecosystem) from the entire crypto space. # Simplified The Simplified page is a simpler trading interface geared towards newcomers and less advanced defi users. It offers 1-click looping strategies. These strategies are not vaults: they're looped positions on money markets, with no guaranteed ROE, just like those that you can open on [Advanced](/app/advanced). All values displayed are for information purposes only. These are the main sections of the interface:

Main sections of the Simplified interface

## 1. Main tabs * **ETH, BTC, AVAX and MATIC Staking** → This subsection displays staking and restaking strategies on ETH and MATIC. It is aimed at those users who want to [loop up on LST and LRT](/basics/use-cases#loop-up-on-lst-lrt-pairs) pairs. Some of these pairs might offer airdrops or points, in which case they're flagged with a 🪂 icon. * **USD Farming** → This subsection only shows stablecoins pairs, like USDC/DAI, and is the go-to page for farmers interested in [farming USD rates](/basics/use-cases#farm-usd-rates) differentials. These pairs can offer rewards from the underlying money markets. ## 2. Active Positions Any position open through the above tabs will be shown in this section, according to the tab you have selected. The *edit* button allows you to: * Open/Increase a position * Close/Modify a position * Modify leverage In order to add a SL/TP or migrate a position please use the [Trade](/app/advanced) interface. ## 3. Filters Beside the obvious filters (chains, assets, markets) there are 3 important inputs you should use to filter pairs: **Amount to invest** → depending on your input, the pairs listed below will change, as well as their ROE, which takes into account the size of your trade. **Min ROE%** → depending on your input, the pairs listed below will change, as well as their ROE and *max amount*, which takes into account the size of your trade. **Include rewards in sorting** → toggling this will affect the list of pairs below, as the ROE of rewards will be included in the sorting. Please be aware that the ROE of rewards is not displayed in the following screen when you click 'create position'. ## 4. Available strategies Not all pairs available on the [Advanced](/app/advanced) page will be shown on the Simplified page: here only strategies with a minimum liquidity of either $1000 (for USD Rates), 1 ETH (for ETH Staking) or 1,000 MATIC (for MATIC Staking) will be displayed. They're ranked by highest ROE. You can also toggle *include rewards in sorting* to account for extra rewards. # Simplified tutorials Please note: this page on the app was previously called "Strategies" as shown in this video: {% embed url="" %} # Advanced The Advanced interface is geared towards advanced defi users and perp traders already familiarized with a trading interface. These are the main sections of the interface:

Main sections of the Advanced interface

## 1. Pair selection The dropdown lists all the pairs currently available on Contango. You can search a pair by typing, or if you wanna narrow down your selection you can use the two filters next to it: *chain* and *money market.* ## 2. Advance Trade Selection The Advance Trade Selection tool lets you dive deep into the endless possibilities of Contango. You can search for a specific *token* or *category* to filter by and select it is as either quote and/or base asset, as well as the *side*, *chain* and *money market* you're interested in. Depending on your filters, you're returned with a list of all avaialble pairs that meet your criteria. By clicking on them, you'll be automatically redirected to the open ticket to trade it. A few examples: * you can filter for `base: wstETH` and `quote: USD Stablecoin` to obtain a list of all wstETH pairs denominated in a USD stablecoin and find the one with the best yield to long across the avaialble chains and markets. * you can filter for `base: USD Stablecoin` and `quote: USD Stablecoin` to obtain a list of all stablecoin pairs and find the one with the best APY or rewards to farm. * you can filter for `base: fixed yield` to scout for the best-yielding PT instruments. ## 3. Charts Charts are plotted using [oracle prices](/resources/glossary#oracle-vs-market-price). 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 have selected. Prices on charts should be seen as mid-market prices, for reference purposes only. ## 4. Opening ticket The opening ticket requires you to input either the *size* or the *margin* first. Please note that: * You can open a position with any currency shown in the dropdown - but be aware of extra slippage you may incur (see the [Margin](/basics/key-features#margin) section). * The ticket shows the current *balance* you have on that specific currency and the chain selected below (don't get fooled by the network you're currently using with your wallet). After that, you can select the leverage, and the market/chain you want to trade on. Expand each market to see the underlying [liquidity](/basics/key-features#liquidity-and-price-impact) you'll be trading on and the breakdown of your APY/ROE. If a money markets is offering rewards, their extra yield is displayed next to the APY/ROE. If a money market offers points or has a confirmed airdrop for the specific pair you have selected, this is indicated by a 🪂 icon next to it. ## 5. Review trade Once you're settled on your trade, you can click on the *review trade* button for a last check on the trade you are placing. Make sure you check your liquidation price and the *market impact* of your trade on the *rates*. ## 6. Open Positions list and Transaction History Any open position, even if you open it through the [Strategies](/app/simplified) page, will be shown in the Open Positions list. The ··· menu allows you to: * Close a position * Modify a position (both size and leverage) * Modify leverage of a position * Add a TP/SL * View the history of a position * Migrate a position The Transaction History section allows you to see all your transaction history and filter for specific position's ID. The ··· menu allows you to: * View the transaction in the block explorer * View the details of the transactions, like entry price, cashflow, fees, etc. # Advanced tutorials Please note: this page on the app was previously called "Trade" as shown in this video: ### Open a position {% embed url="" %} ### Modify a position {% embed url="" %} ### Close a position {% embed url="" %} ### Advance trade selection {% embed url="" %} ### Repay debt {% embed url="" %} # Staking {% hint style="danger" %} Staking is currently suspended ([X announcement](https://x.com/Contango_xyz/status/1985828910517665846)).\ TANGO buybacks are currently in place ([X announcement](https://x.com/Contango_xyz/status/1987943415993299238)). {% endhint %} These are the main sections of the Staking interface:
## 1. Overview Here you can see the total amount staked on Contango and its dollar value. On the right, you can see the max staking APR, which includes rewards from LPing on Balancer (swap fees and wstETH bearing yield), plus rewards coming from Contango's protocol fees. ## 2. Staking ticket It you've never staked before, only this section shows up. It allows you to select a duration and stake your CBPT. ## 3. Your staking position Once you've staked, this section appears and recaps your staking details. It also allows you to monitor your pending rewards and claim them. # How staking works TANGO holders who provide liquidity on the [80/20 Balancer pool](https://balancer.fi/pools/arbitrum/v2/0x1ed1e6fa76e3dd9ea68d1fd8c4b8626ea5648dfa0002000000000000000005cb) can stake and lock their LP tokens on Contango. In exchange of taking the risk of impermanent losses, minimized by the 8020 design, stakers are currently rewarded with 100% of the Contango trading fees. When locking, users will be credited a veCBPT balance (CBPT as in *Contango Balancer Pool Token*) based on the amount and duration of the lock. Please note that each user’s balance of veCBPT decays linearly over time. Although veCBPT won’t have a voting mechanism at the start, we opted for the veCBPT naming because of its similarities with other [veToken designs](https://www.coingecko.com/learn/vetokens-and-vetokenomics). For simplicity, let’s call *staker* any user with a veCBPT balance. All staking and locking actions occur on Arbitrum. By becoming Contango stakers, users will receive the following rewards: 1. **Balancer trading fees.** While locking on Contango, users keep receiving a share of trading fees from the TANGO/wstETH pool each time a swap is made. 2. **BAL rewards from Balancer**. While locking on Contango, users keep receiving BAL incentives too. 3. **Contango protocol fees**. Initially, 100% of the protocol revenue will be distributed to stakers, who are compensated for providing liquidity on Balancer and facing the risk of impermanent loss. In the future, a portion of protocol revenue may be redirected to the Contango treasury. Fees are distributed based on each user’s share of the total veCBPT locked.
It’s important to understand that: * veCBPT decays linearly over time, just like other veTokens in DeFi. Although veCBPT won’t have a voting mechanism at the start, we opted for the veCBPT naming because of its similarities with other [veToken designs](https://www.coingecko.com/learn/vetokens-and-vetokenomics). * The staking contract (the same as Balancer's) computes your share of total veCBPT during a week. On the midnight between Wednesday and Thursday at 00:00 UTC a new week starts. You need to stake for a full week to be eligible for receiving protocol fees. * Staking duration is always rounded down to the nearest Thursday of the selected duration. * Money sent to the [rewards contract](/app/staking/staking-apr#fee-collection) on week N will be claimable on week N + 1. in other words, the first week of staking is not taken into account for fees distribution, so staking on Thursday at 00:01 UTC or on the following Wednesday at 23:59 makes no difference. * Balances at the beginning of each epoch are being considered when distributing rewards via the staking contract, so if you wanna maximise your share, extending the lock period every Wednesday should do the trick. # Staking APR Stakers are rewarded for their service of providing liquidity and facing impermanent loss on the [80/20 Balancer pool](https://balancer.fi/pools/arbitrum/v2/0x1ed1e6fa76e3dd9ea68d1fd8c4b8626ea5648dfa0002000000000000000005cb). Rewards currently come from 3 sources, which are reflected in the staking APR: * Balancer swapping fees * wstETH bearing yield (since this is the currency paired with TANGO on the Balancer pool) * Staking rewards coming from Contango protocol fees
Screenshot of staking APR
Let's dig more into how fees are collected, transfered and then computed into the APR: ## Protocol fees collection The process is as follows: 1. [Trading fees](/basics/key-features#fees) are collected on each chain in a fee collector contract (`0xfee97c6f9bce786a08b1252eac9223057508c760`). 2. When a given threshold is reached, fees are converted to a basket of blue-chip currencies and swapped to the fee collector contractor contract on Arbitrum to minimize transaction costs. 3. When a given threshold is reached, the fees from the fee collector on Arbitrum are sent to the reward distributor on Arbitrum (`0xb35b3004125e342d9a996e1b274fe85cc22d46f2`).
Diagram explaining fees collection and distribution to stakers
Protocol fees are distributed weekly according to the share of veCBPT, through a basket of blue-chip currencies (e.g. ETH, WBTC, USDC). This basket will eventually be optimized over time to minimize swapping and bridging costs, since Contango collects fees at the UI level in a wide variety of currencies and chains. ## APR overview Once staked, on the [Staking](/app/staking) page you find two APRs: 1. The *max staking APR* you could get if your CBPT are staked for the maximum duration, i.e. 52 weeks. 2. Your *estimated APR* for a given week.
Screenshot of staking page showing two APRs
## APR computation This is how your staking APR is computed: * Get the total fees available in the Reward Distributor Contract, minus the fees which have not been collected yet in the previous weeks. * Multiply this number by your share of total veCBPT on Thu 00:00 UTC. * Assume no more fees will be collected during the week, annualize this number and divide it by the value of your CBPT staked. Example: * Your CBPT staked value is 10.24$. * Your share of the total CBPT is 0.42% on Thu 00:00 UTC. * You are going to receive 0.082$ of fees. * Your APR is 41.64%. # Staking tutorial Staking involves 3 steps: ### 1. Providing liquidity on Balancer Go to the [TANGO/wstETH pool on Balancer](https://balancer.fi/pools/arbitrum/v2/0x1ed1e6fa76e3dd9ea68d1fd8c4b8626ea5648dfa0002000000000000000005cb) and provide liquidity, with either one or both tokens.
LPing on Balancer
You’ll receive a receipt token called 20wstETH-80TANGO, that we decided to call CBPT (Contango Balancer Pool Token) for simplicity. ### 2. Staking on Contango Go on Contango and stake your CBPT for the duration you like.
Stake module on Contango
Depending on the amount and duration, you’ll get credited an amount of veCBPT. This is credited on the UI, not in your wallet. You can add to your existing share by staking more CBPT via the ticket on the right and, for the time being, it will have the same duration as your first stake.
Stake module on Contango
You can also extend your lock duration by using the “Extend” option. ### 3. Earn and claim fees Protocol fees will be claimable weekly according to the share of veCBPT, through a basket of blue-chip currencies (e.g. ETH, WBTC, USDC).
Claiming rewards from staking
# oTANGO
The oTANGO interface lets you exercise your oTANGO airdrop to purchase TANGO at a discount. This page is geared towards early users of the protocol who have accrued oTANGO by using both Contano v1 and v2. * The airdrop was designed to align incentives between the protocol and early users, and disincentivize short-term farmers. All rules were made public [here](https://medium.com/contango-xyz/tangonomics-1baadca23e81). * The oTANGO airdrop initially allocated 18.3% of the total supply to early users who used v1 and v2 *up until the 29th of October 2024*. Since some users didn't end up claiming their share, around 3% of the supply went back to the treasury, so the final supply allocation for oTANGO is 15.3%. oTANGO is a perpetual option token that allows you to purchase TANGO at a discount. The discount is determined by the ongoing TANGO price. See the next section for more details. # oTANGO tutorial ## Understanding oTANGO oTANGO is an *option token* for TANGO, inspired by the [Bunni docs on oLit](https://docs.bunni.xyz/docs/v1/tokenomics/olit). An option token allows you to redeem the underlying token at a discount. This mechanism aligns incentives among all parties: * It rewards early users who believe in the long-term success of the protocol by giving them tokens at a discounted price. * It allows the protocols to transfer cash gains from short-term airdrop farmers to its treasury. * It incentivises parties to hold the token as the discount becomes bigger with time. Let’s unwrap this with an example: Let’s assume the price of TANGO is $0.1. The discount curve shown below implies that 1 oTANGO grants its holder the *perpetual right* to acquire 1 TANGO at around a 20% discount. An airdrop farmer can exercise the option to buy 1 TANGO for $0.08 on the Contango smart contract and sell it on a secondary market for $0.10, locking in a $0.02 profit, which is equivalent to a 20% gain. Please note that the user does not necessarily need to bring the initial $0.08 to lock in a profit: he could initiate a [flash loan](/resources/glossary#flash-loan) for $0.08, exercise the option to buy 1 TANGO for $0.08, sell 1 TANGO token for $0.1, repay the flash loan of 0.08$ and lock in the $0.02 profit, all in one atomic transaction. There's a twist: to further ensure that users are aligned with the protocol growth, the discount to which users can exercise oTANGO to redeem TANGO depends on the price of TANGO itself. The higher the price, the bigger the discount. This way, users are incentivized to hold in the hope of getting a higher discount. * To ensure that the airdrop program doesn’t put pressure below Contango’s seed valuation, the discount is set to 0 when the price is at $0.045, which represents an FDV of $45M. If the TANGO price is under $0.045, the redemption (or exercise) price remains at $0.045. * The discount is above 0% when the TANGO price is above $0.045. * The discount remains at 75% when the price is at or above $1. The following chart and table show the discount relative to the TANGO price:

Discount curve to redeem oTANGO for TANGO

The conversion of points to oTango is fixed at 3x, meaning that for each point users receive 3x oTANGO tokens.\ \ More info on the airdrop can be found [here](https://medium.com/contango-xyz/the-otango-airdrop-0c94b2822498). ## Claiming The first step is to claim your airdrop. You just need to connect your wallet and click *Claim oTANGO:*
## Exercising Once claimed, you can exercise a given amount of oTANGO to buy TANGO at a discount. To do that, simply input the quantity of oTANGO that you want to exercise: the UI will tell you the amount of USDC that you need to bring to complete your purchase of TANGO.\ \ Before executing, review the *discount* at which you're exercising the oTANGO option and the *strike price*.
# Profile
The Profile page gives an overview of your personal stats and lets you monitor several indicators, namely: * Your tier and XP balance, which impacts your trading fee discount. * Your [points](/basics/key-features/incentives-and-rewards/contango-points) ranking, which entitle you to a share of the quarterly TANGO pot. * Your [staking](/app/staking) share, which entitles you to weekly rewards from protocol fees. All metrics and indicators have tooltips and are self-explanatory.\ # TANGOnomics {% hint style="danger" %} Staking is currently suspended ([X announcement](https://x.com/Contango_xyz/status/1985828910517665846)).\ TANGO buybacks are currently in place ([X announcement](https://x.com/Contango_xyz/status/1987943415993299238)). {% endhint %} {% hint style="success" %} TANGO contract (Arbitrum): [0xC760F9782F8ceA5B06D862574464729537159966](https://arbiscan.io/address/0xc760f9782f8cea5b06d862574464729537159966)\ oTANGO contract (Arbitrum): [0x007606064f8A40745336F91a1E4345900143756b](https://arbiscan.io/address/0x007606064f8A40745336F91a1E4345900143756b)\ Staking contract (Arbitrum): [0x96Aa72542cE42F99F93de51e2F24Cc2601c6221a](https://arbiscan.io/address/0x96aa72542ce42f99f93de51e2f24cc2601c6221a) {% endhint %} TANGOnomics aims at deepening TANGO liquidity and incentivizing growth by rewarding both stakers and traders, the main players in the Contango ecosystem. Let’s look at how both are rewarded. ## Stakers After the [initial sale](https://medium.com/contango-xyz/all-you-need-to-know-about-the-tango-launch-db4a689191a5) on Fjord, an 80/20 pool on Balancer was seeded to create the first spot liquidity for TANGO, on Arbitrum. Providing liquidity to the 80/20 Balancer pool is rewarded, to allow initial holders of TANGO (both sale participants and [oTANGO](/app/otango) receivers) to put their holdings to work and earn some APR. More specifically, TANGO holders who provide liquidity on Balancer can stake and lock their LP tokens on Contango. When locking, users will be shown a veCBPT balance based on the amount and duration of the lock. Please note that each user’s balance of veCBPT decays linearly over time. Although veTANGO won’t have a voting mechanism at the start, we opted for the veCBPT naming because of its similarities with other [veToken designs](https://www.coingecko.com/learn/vetokens-and-vetokenomics). For simplicity, let’s call *staker* any user with a veCBPT balance. All staking and locking actions occur on Arbitrum. By becoming Contango stakers, users will receive the following rewards: 1. **Balancer trading fees.** While locking on Contango, users keep receiving a share of trading fees from the TANGO/wstETH pool each time a swap is made. 2. **Contango protocol fees**. Initially, 100% of the protocol revenue will be distributed to stakers, who are compensated for providing liquidity on Balancer and facing the risk of impermanent loss. In the future, a portion of protocol revenue may be redirected to the Contango treasury. Fees are distributed based on each user’s share of the total veCBPT locked.
Stakers actions and rewards
Since each staker’s balance of veTANGO decays over time until the end of the lock, it’s worth noting that both the amount locked and the duration of the lock play a role in determining how fees are distributed. See the [Staking ](/app/staking/staking-tutorial)section for more details. ## Traders Traders are entitled to a share of annual TANGO rewards, based on their balance of Contango points.
Traders actions and rewards
Weekly Contango points from [Phase 2](https://medium.com/contango-xyz/the-road-to-the-contango-token-launch-8d1a0e6b9f5b) were distributed up until the 29th of October 2024 at 23:59 UTC (1M points per week + extra points for bug reporting). After TANGO launched via Fjord and the Balancer pool was seeded, protocol fees were enabled on the 4th of November 2024, and Phase 3 started. It will last three months. Each three months a new Phase begins. Points in each Phase entitle users to a share of the annual TANGO rewards. Each year, for the next 3 years, up to 2% of TANGO supply can be allocated to these rewards (currently, 1M TANGO is distributed every quarter). Points in each Phase are accrued based on the amount of $ traded, as per the following formula: *$1 in adjusted volume traded = 1 Contango point* Adjusted volume is defined as the sum of the volumes on all trading pairs, protocols, chains, adjusted by the coefficient C (where C=1 for non-correlated trading pairs, and C=0.2 for correlated ones). In other words, volume on correlated pairs counts 5 times less, as these pairs have higher leverage and less price risk. ## XP system To spur ecosystem growth, both staking and trading are further incentivized via an XP system which classifies users into different tiers. Users are entitled to a *multiplier* on their Contango points and a specific *discount on trading fees* depending on these tiers, as follows:
If there are ongoing partner deals on points multipliers, these will stack up on the current multiplier of each user. The balance of XPs is determined by the amount traded and the share of veCBPT over the total locked veCBPT, as follows:
In other words, your total XP balance is the sum of the XP you get from trading and the XP you get from your share of total veCBPT. The veCBPT balance, the 30 day volume and hence the XP balance are all computed daily at 00:00 UTC. You can see your XP tier and fees discount at the top-right of the app.
*Disclaimer: the Contango team reserves the right to unilaterally modify the above-mentioned parameters (XPs, multipliers, percentages, discounts) if it deems it relevant for the benefit of the protocol.* # Allocations and unlocking {% hint style="info" %} TANGO was launched on Fjord on October 21st 2024. An official liquidity pool was seeded on [Balancer](https://balancer.fi/pools/arbitrum/v2/0x1ed1e6fa76e3dd9ea68d1fd8c4b8626ea5648dfa0002000000000000000005cb) a few days later. {% endhint %} {% hint style="success" %} TANGO contract (Arbitrum): [0xC760F9782F8ceA5B06D862574464729537159966](https://arbiscan.io/address/0xc760f9782f8cea5b06d862574464729537159966)\ oTANGO contract (Arbitrum): [0x007606064f8A40745336F91a1E4345900143756b](https://arbiscan.io/address/0x007606064f8A40745336F91a1E4345900143756b) {% endhint %} TANGO is Contango’s utility token, with a total supply of 1,000,000,000 and represents the centerpiece of the protocol’s tokenomics, aka TANGOnomics.
More than 60% of TANGO supply is allocated to the Community. 6.7% of the supply was made available through a [public sale on Fjord](https://medium.com/contango-xyz/all-you-need-to-know-about-the-tango-launch-db4a689191a5) in October 2024. Initially 18.3% of the supply was made claimable through the [oTANGO airdrop](https://medium.com/contango-xyz/the-otango-airdrop-0c94b2822498) a few weeks after the sale. Since some users didn't end up claiming their share, around 3% of the supply went back to the treasury, so the final supply allocation for oTANGO is 15.3%. 35.6% is allocated to ecosystem development. Here’s a few examples: * Trading incentives (e.g. 2% of the supply will be allocated each year for 3 years to reward traders). * Protocol-owned liquidity on dexes (e.g. initially, around $800,000 worth of TANGO were paired against ETH to seed liquidity on Balancer). * Community or developer grants. 3% will be allocated to AlphaDAO, which helped kickstart Contango in 2021. The only tokens that have a cliff and vesting are those allocated to: * the team (1 year cliff, 2.5 years vesting) * investors (6 months cliff, 2 years vesting) * AlphaDAO (1 year cliff, 2.5 years vesting). The full unlocking schedule is presented in the chart below.
### Past private raises
RoundAmount raisedDatePriceValuation% of supplyCliff / Vesting
Investors: Pre-seed$0.3MQ2 2021$0.012$12M2.5%after TGE: 6 months / 2 years
Investors: Seed$3.7MQ1 2022$0.045$45M8.1%after TGE: 6 months / 2 years
Investors: Seed extension 1$0.46MQ3 2022$0.045$45M1.0%after TGE: 6 months / 2 years
Investors: Seed extension 2$0.16MQ1 2024$0.045$45M0.3%after TGE: 6 months / 2 years
total$4.62M11.9%
### Public raise
RoundAmount raisedDatePriceValuation% of supplyCliff / Vesting
Fjord fixed-price sale$3MQ4 2024$0.045$45M6.7%none
# Link tree ### App This is the official link to the Contango app: Custom subdomains for money markets offer pre-filtered pairs for each one: * * * * * * * * * * * * ### Socials * Twitter: * Discord: * DeBank: * Medium: * Youtube: * LinkedIn: ### TANGO * Balancer 80/20 official pool: * Coingecko: * CoinMarketCap: ### Stats * Dune: * Messari: * DefiLlama: ### Articles * Delphi Digital: [A forward-looking appraoch to leverage](https://members.delphidigital.io/reports/contango-a-forward-looking-approach-to-leverage) (about v2) * The Defiant: [Contango Launches Decentralized Perpetuals Leveraging Aave ](https://thedefiant.io/news/defi/contango-launches-decentralized-perpetuals-leveraging-aave)(about v2) * The Defiant: [Contango Taps Spark For DeFi Native Perps](https://thedefiant.io/news/defi/contango-taps-spark-for-defi-native-perps) (about v2) * Coindesk: [Contango Pushes Retro Alternative to Perps With 'Expirable Futures'](https://www.coindesk.com/markets/2022/07/14/dex-contango-pushes-retro-alternative-to-perps-with-expirable-futures/?_gl=1*wcmhju*_up*MQ..*_ga*MzQ3NDk1MjYyLjE3MTM5NjM3ODY.*_ga_VM3STRYVN8*MTcxMzk2Mzc4Ni4xLjAuMTcxMzk2Mzc4Ni4wLjAuNTk4MDE2NTY1) (about v1) # Brand assets ### Texts {% hint style="info" %} **Tagline:** DeFi looping, the crypto native way of trading {% endhint %} {% hint style="info" %} **Short blurb:** Contango lets you loop anything on-chain. You can create leverage (re)staking positions, arb rates differentials, farm points, or simply go long or short like a perp at low funding. {% endhint %} {% hint style="info" %} **Long description:** Contango lets you loop anything on-chain. You can create leverage (re)staking positions, arb rates differentials, farm points, or simply go long or short like a perp at low funding. Ape in like a degen through the Simplified interface, or trade like a pro on the Advance interface. {% endhint %} ### Icon
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# Contracts and audits ### Contracts See our Github for a [full list of addresses](https://github.com/contango-xyz/core-v2/blob/main/networks.json). See [TANGOnomics](/tango/tangonomics) for TANGO-related contracts.\ \ Contango uses [Hypernative](https://www.hypernative.io/) for live monitoring and threat detection. ### Audits Contango v1 and v2 smart contracts are fully audited by [ABDK](https://abdk.consulting/). Minor audits include [Open Zeppelin](https://www.openzeppelin.com/) and [Offbeat Security](https://offbeatsecurity.xyz/).\ \ Contango has also carried out an Operational Security audit by [OpSek](https://www.opsek.io/).\ \ Find all the report at: \
# Permits and approvals When you open a position on Contango, by default you sign a gas-less permit. Contango uses permits wherever possible, to make the user experience smoother. You might still face the need to use approvals, e.g. when using a multisig or when permits are not available for some tokens. Contango gives you the choice of selecting among Permit, Permit2, Approval: after clicking the ‘Review trade’ button, you can select your preferred option by clicking the dropdown arrow in the ‘Approve’ button. Here below you have a quick overview of how permits and approvals are used on Contango (a more comprehensive explanation can be found on [Ledger’s website](https://www.ledger.com/academy/ethereum-token-approvals-explained)): ### What’s an Approval? A token approval is a method to allow a smart contract or address to withdraw funds from your address. In other words, an approval is an on-chain permission that users grant to smart contracts to allow them to access a specific amount of their tokens without needing a wallet signature for individual transactions. It sets the so-called spending allowance. As the approval confirmation happens on-chain, there’s a gas fee associated with it. {% hint style="info" %} On Contango, you can choose to use approvals, but this is not the default option. When using approvals you set the specific amount you want to approve: a high amount can help avoid further approvals later on and simplify your user experience, but at the same time you expose yourself to the risk of potential Contango exploits that could use this allowance and drain funds from your wallet. Revoke.cash is a useful tool to revoke any unwanted allowance. {% endhint %} ### What’s a Permit? [ERC-2612](https://eips.ethereum.org/EIPS/eip-2612) introduced a new method of Ethereum token approvals known as Permit signatures. Permits allow you to grant token approvals by signing a message off-chain. In other words, it's a gas-less transaction that replaces an approval transaction by signing a piece of data inside your wallet. When using permits, the cost of setting an allowance will still be batched into the real transaction that you sign when opening a position, which results in a smoother user experience. {% hint style="info" %} On Contango, permits are the default option for the majority of tokens. If a token does not support permits, Contango defaults back to Permit2. When signing a permit, this is only for the exact amount needed for the specific transaction you’re about to execute. {% endhint %} ### What’s a Permit2? Permit2 is a new approval contract built by the Uniswap team that extends the benefits of [ERC-2612](https://eips.ethereum.org/EIPS/eip-2612) to all tokens. In other words, Permit2 allows you to use gasless approvals for any token, regardless of whether that token has integrated ERC-2612. In addition, Permit2 has automatic expiration built-in, eliminating the security risk that comes with lingering token approvals. {% hint style="info" %} On Contango, permit2 is used as the best option to default to if permit is not available for a given token. Permit2 grant and infinite allowance once, just like approvals, but via an immutable and verified contract from Uniswap. {% endhint %}
# Glossary ### APY The 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 the Contango UI. 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 other perp venues. It is accrued as PnL and it is settled when closing the position. [APY is different from ROE](/resources/faq#what-is-the-difference-between-roe-and-apy) (return on equity). ### **Contango and backwardation** Contango, as a project, takes its name from *contango* which is financial lingo to indicate a market situation when the price of a futures contract is higher than the spot price of the underlying asset. Conversely, *backwardation* happens when the price of a futures contract is lowers than the spot price of the underlying asset. ### Base and quote currency An exchange rate between two currencies follows the base/quote notation, and indicates how much of the quote currency is needed to buy one unit of the base currency. For example, ETH/USDC = 1000 means that 1 ETH is equal to 1000 USDC. In other words, the base is the asset you want to trade, the quote is the currency in which that asset is quoted in. ### Basis points Basis points are often referred to as "bps" or "bips". A basis point is a unit of measure often used in finance to indicate percentages. 1 basis point is equal to 1/100th of 1%, or 0.01%. So, for instance, trading fees can be expressed as basis points: 0.05% = 5 bps. ### Flash loan A flash loan is a type of DeFi loan where an asset can be borrowed with no upfront collateral as long as it is returned within the same blockchain transaction. ### Leverage Leverage usually refers to borrowed capital that allows traders to amplify their buying or selling power. [Leverage](/resources/glossary#leverage) on Contango is determined by the loan-to-value ratio (meaning: how much you can borrow against your collateral) on the underlying money market. Leverage is = 1/(1 - LTV ratio). If we take [Aave](https://aave.com/)’s parameters as a reference, we can see the amount of leverage that its standard LTV ratios can offer: * 82.5% LTV is equivalent to 5.7x leverage (e.g. for ETH/DAI or ETH/USDC pairs) * 90% LTV is equivalent to 10x leverage (e.g. for same-flavor pairs like stETH/ETH) * 93% LTV is equivalent to 14.3x leverage (e.g. for stable pairs, like USDC/DAI or EUR/USDC) Just like with money markets where there is a distinction between max [LTV ratios](/resources/glossary#loan-to-value-ratio-ltv) and liquidation thresholds, on Contango there’s a max leverage to open a position and a higher leverage threshold at which traders get liquidated. ### Liquidation price It's the oracle price at which your positions is eligible for liquidation on underlying money markets. As a reminder, Contango doesn't perform any liquidation. ### Loan-to-value ratio (LTV) The LTV ratio defines the maximum amount of assets that can be borrowed with a specific collateral. It is expressed as a percentage (e.g., at LTV=82.5%, for every 1 ETH worth of collateral, borrowers will be able to borrow 0.825 ETH worth of the corresponding currency). ### Margin ratio This is the value of the margin, posted by a trader, relative to price to open a position. ### Money market Any market that offers borrowing and lending, either with variable or fixed rates. Variable-rate markets are used by Contango to build leveraged positions that consist of two legs, a borrowing and a lending one. The net [APY](/resources/glossary#apy) determined by the variable rates of the two legs can be interpreted as the funding rate of the position, which in turn can be seen as a perpetual instrument. Contango could integrate fixed-rate markets too, to build fixed-rate positions that can be seen as dated futures. ### Oracle vs market price A *market price* is the real price at which an asset is traded. An example of market price is any firm quote on the entry price (shown with :white\_check\_mark: on the Contango UI). An *oracle price* uses a decentralised price feed to value an asset. It is worth noticing that there are 2 types of oracle feeds that could be used by money markets: a) exchange rate feed: reports the rate at which you can exchange, for instance, wstETH/stETH on the mainnet wstETH contract, so it's not affected by market forces trading on venues like Balancer, Uniswap, etc. b) market price feed: reports at the current price at which, for instance, wstETH could be traded on the spot markets, regardless of the chain. It's up to each money market to do the risk analysis on which feed they want to use. For instance, for wstETH/ETH, Aave and Spark use the exchange rate feed, while Exactly use the market rate feed.\ \ An [excellent thread by Stephen from Defi Dojo](https://x.com/phtevenstrong/status/1820831789138534647?s=46\&t=oH1r28vi2qiKgxDWHeddHQ) recaps the differences and the risks of the two types. ### Market impact on rates It indicates by how much your trade size will impact the APY of the instrument you're trading. In other words, for all markets (except lending on Exactly), Contango has a copy of the interest rate models that the underlying market uses on the UI, and applies said algorithm to what the new lending and borrowing amounts would be in the respective pools. To our knowledge, Contango is the only protocol using this advanced feature. In an ideal world, everyone uses Contango and by simply looking at the market impact of their trade on the rates they might refrain from entering a trade which flips the rates or dilutes the yield substantially. So, even if you don't plan to trade on Contango, it is highly recommended to use it for simulation purposes, to avoid yourself and others any nasty surprise on the rates. ### Spot market A market that offers swapping assets at a spot price. eg. [Uniswap](https://uniswap.org/). ### Tokenized NFT position An ERC-721 Non-Fungible Token that represents ownership of a position. Tokenizing a position allows the independent transfer of its ownership without the need to update Contango's internal accounting. This enhances composability, as positions can be bought and sold on a secondary market or in a private transaction, and potentially used as collateral in third party protocols. # FAQ {% hint style="info" %} For PTs-related FAQs see [this subsection](/resources/faq/pt-instruments). {% endhint %} *** ### What is Contango? Contango is the [looping](/basics/what-is-looping) layer of DeFi. It lets you loop anything on-chain. You can create leverage (re)staking positions, arb rates differentials, farm points, or simply go long or short like a perp at low funding.\ \ If you're more the visual type, use this short video by Stephen from Defi Dojo to learn about key topics: * What's looping? → [0:32](https://youtu.be/u7MXBVzPto4?feature=shared\&t=32) * How cheap is funding compared to perps? → [2:00](https://youtu.be/u7MXBVzPto4?feature=shared\&t=126) * What can you loop? → [3:00](https://youtu.be/u7MXBVzPto4?feature=shared\&t=168) * How to use the simplified page? → [3:32](https://youtu.be/u7MXBVzPto4?feature=shared) * How to compute the market impact on rates? → [4:10](https://youtu.be/u7MXBVzPto4?feature=shared\&t=250) * How to farm incentives? → [5:30](https://youtu.be/u7MXBVzPto4?feature=shared\&t=329) * How to leverage PTs? → [6:15](https://youtu.be/u7MXBVzPto4?feature=shared\&t=377) * What to watch out for before entering a position? → [7:45](https://youtu.be/u7MXBVzPto4?feature=shared\&t=469) {% embed url="" %} ### Do I need to deposit before trading? No. Normally, when you lever up on money markets you need to borrow, swap, lend all in one transaction, and for that you need a smart account (like on Defi Saver or Instadapp). Contango hides this abstraction under the hood since its interface is mainly geared towards trading. This is great for users, as they don’t need to go through additional clicks to create and fund a smart account. On Contango you connect your wallet and can start trading right away. No need to deposit anything! ### What pairs can be listed on Contango? The available pairs 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](/resources/glossary#money-market). Contango plans to integrate different variable money markets across multiple chains to expand its pair offering as much as possible. ### How is the implied funding rate (APY) computed? The variable funding rate 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](/resources/glossary#apy) on Contango. Read more about [funding rates](/basics/key-features#funding-rates). ### What is the difference between ROE and APY? Both ROE and APY are useful indicators to estimate your profits and costs on a given position. You can always toggle between them in the app (when opening a position, in the *Advance Trade Selection* tool and in the *Open Positions* list).\ \ At a high level: * APY (*annual percentage yield)* is determined by the interest rate difference in notional terms (calculated as a percentage of the notional value of the position) * ROE (return on equity) is the same concept but computed on your initial equity (margin). The APY is determined by the difference between the lending profits and the borrowing cost of a position, which you normally see referenced as *borrow APY* and *supply APY* on money markets. That’s why it’s also called [APY](/resources/glossary#apy) on the Contango UI. The APY is thus the *implied funding rate* of your position, but its sign is inverted compared to funding rates on other perp venues. It's a useful metric to monitor when trading non-correlated pairs (e.g. ETH/USDC). Please note that the APY varies with leverage: the higher the leverage, the worst the APY (as more money has to be borrowed). On a side note, Contango has the cheapest and most stable funding in the space ([source](https://medium.com/contango-xyz/why-you-should-trade-on-leverage-using-money-markets-93b988fc69ec)). On the other hand, ROE is computed on your initial margin and thus offers an insight into the estimated returns you can have on your initial capital. It becomes a useful metric to monitor when doing correlated asset loops (e.g. wstETH/ETH or USDC.e/USDC), as you're not betting on the underlying asset increasing in value, you're just "farming" an interest rate spread. Similarly to the APY, the ROE varies with leverage. ### Why are funding rates cheaper and less volatile than perps? By design the funding rate on Contango comes from the borrowing and lending rates of the underlying money markets, which tend to be cheaper and less volatile than standard funding rates on perp trading venues. Contango’s rates are on average 3x less volatile and cheaper than market leaders like Binance and dYdX. More details can be found on this [article](https://medium.com/contango-xyz/an-introduction-to-cperps-4dbb4a58b602). ### Why is it cheaper to use Contango instead of other looping products? Contango has some of the lowest[ trading fees](/basics/key-features#fees) on both non-correlated and correlated loops. It also uses free flash loans most of the time when building positions. Plus, it uses [Balmy (ex Mean Finance)](https://mean.finance/create)'s DSK when performing swaps to build a position so you always get the best price across DeFi. And on top of that, Contango also uses [Enso](https://www.enso.build/) 'shortcuts' anytime minting is cheaper than swapping on a secondary market. ### What is considered a safe value for leverage? Selecting a value for leverage is ultimately a personal choice, which relies on your risk tolerance. Correlated pairs like wstETH/ETH or DAI/USDC have less price risk than non-correlated pairs like ETH/USDC, but depeg events can always occur, so never open at max leverage unless you have a clear understanding of the implied [risks](/basics/risks). Contango provides a *liquidation buffer* indicator to help you gauge by how much price should drop for your position to get liquidated. ### How’s the *mark price* computed? Price shown in the opening ticket or in the 'Open Positions' list is the [oracle price](/resources/glossary#oracle-vs-market-price) that the underlying money market uses to value that pair. Therefore this is the most accurate measure of how to compute healthiness and liquidation price of a position. This price is what is used for liquidations, which are indeed performed by the underlying money markets. ### Why is the *mark price* different from the price shown in the charts? In order to plot [charts](https://docs.contango.xyz/resources/pages/DABbYqIroio13gmON2LL#id-3.-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 money market you’ve selected. Prices on charts should be seen as mid-market prices, for reference purposes. ### Why is the *mark price* different from the *entry price*? Mark price is an [oracle price](/resources/glossary), while the entry price is a firm quote of a [market price](/resources/glossary#oracle-vs-market-price). There are two scenarios (let's assume you're going long): 1. The entry price is lower than the mark price: in this case, this is better for you as you got a cheaper price. 2. The entry price is higher than the mark price: in these rare instances, what could happen is that, if you open at max leverage, the transaction may fail, as the amount you’re actually getting will probably not be enough to collateralise the debt of your position. This is because no money market would let you open a position that is already violating the max [LTV](/resources/glossary#loan-to-value-ratio-ltv) rule. ### How’s the *market impact on the rates* computed? With every trade the prevailing interest rates change due to the lending and borrowing activity that happens as a result. The market impact on rates is computed by looking at your trade size and checking by how much it moves the rates on the underlying market. To our knowledge, this metric is not even shown on the underlying money markets, but it’s particularly useful especially if you’re trading with size and you don’t want to move the rates against your trade. ### Why is leverage sometimes lower compared to competitors’ products? Contango adds around an extra 2.5% liquidation buffer on markets that don't differentiate between max loan-to-value (LTV) and liquidation threshold. This is meant to spare users from nasty surprises. This is also why the max leverage on some markets (e.g. on MorphoBlue) can be lower in Contango than on competitors’ products. For instance, instead of 13.8x on Contango, you could lever up to 18x on stETH/ETH on other competitors’ products, but you’ll be right on the edge of liquidation. Said buffer can be smaller on some specific instruments, like sUSDe and USDe, where it's 0.25%. ### What is the *dust* button on the UI? When you close a position and chose to get the money in the base currency (quote currency for shorts), due to the fact that Contango needs to sell base to pay the debt - but can't know exactly how much it needs to be sold - it sells a bit more, and the remainder goes to the user's account in the vault, in the form of dust. This can be claimed by the trader anytime by clicking the *dust* button at the top. ### Is there a liquidation penalty? Money market might have different liquidation penalties. 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. You can find more information on the liquidation process of each money market in their respective docs. As a reminder, Contango doesn't perform [liquidations](/basics/key-features#liquidations). ### Are trades MEV-protected? No. Any action on Contango that requires a spot trade is susceptible of MEV attacks. If you're trading on mainnet it is highly recommended to use a MEV protected RPC. ### Should I use permit, permit2 or approval? Permits are used by default on Contango for most tokens, but you can still select your favourite choice among *Permit*, *Permit2*, *Approval*: after clicking the ‘Review trade’ button, select your preferred option by clicking the dropdown arrow in the ‘Approve’ button. Read the [Permits and approvals ](/resources/permits-and-approvals)section for more details. Broadly speaking: * Permits are your best and safest option. Using permits allows for a smoother user experience as you don’t have to pay gas for the approval transaction and you don’t expose yourself to the risk of infinite allowances. But remember: the cost of setting an allowance will still be batched into the real transaction that you sign when opening a position. * Permit2 is the second best option. Contango automatically defaults to permit2 for tokens that don't support permits. This option offers the benefit of infinite allowance, just like approvals, but via an immutable and verified contract from Uniswap, with all the benefits of permits. * Approvals are the least safe option. You can benefit from having an infinite allowance and avoid further approvals later on, but at the same time you expose yourself to the risk of potential Contango exploits that could use this allowance and drain funds from your wallet. If you decide to use approvals, in order to mitigate risks: don’t input an infinite allowance and use revoke.cash to revoke unwanted approvals. ### How often is the information displayed on the *open ticket* updated? Lending and borrowing rates shown in the trade ticket when opening a position are automatically updated every 60 seconds. For the bearing rates, like wstETH, all data is usually updated every 24 hours, except for Pendle's PT assets and Ethena's assets, which are updated every 60 minutes. ### Why is the bearing rate shown for sUSDe different from Ethena's page? Contango computes sUSDe yield by measuring the price change over the last 300 blocks and extrapolating this to get an annualised rate. We believe this reflects a more realistic staking rate; so please bear in mind that this differs from Ethena's official page, as their rate is computed as the annualised hourly rate differential and gets diluted by new users minting sUSDe. ### What's the difference between an exchange rate oracle and a market rate oracle? An [oracle price](/resources/glossary#oracle-vs-market-price) uses a decentralised price feed to value an asset. It is worth noticing that there are 2 types of oracle feeds that could be used by money markets: a) exchange rate feed: reports the rate at which you can exchange, for instance, wstETH/stETH on the mainnet wstETH contract, so it's not affected by market forces trading on venues like Balancer, Uniswap, etc. b) market rate feed: reports at the current price at which, for instance, wstETH could be traded on the spot markets, regardless of the chain. It's up to each money market to do the risk analysis on which feed they want to use. For instance, for wstETH/ETH, Aave and Spark use the exchange rate feed, while Exactly use the market rate feed.\ \ An [excellent thread by Stephen from Defi Dojo](https://x.com/phtevenstrong/status/1820831789138534647?s=46\&t=oH1r28vi2qiKgxDWHeddHQ) recaps the differences and the risks of the two types. ### Does Chainlink use Lido's exchange rate or secondary market for wstETH/stETH? The source of truth for what the Lido exchange rate is lives on Ethereum mainnet, because the real wstETH smart contract is on Ethereum mainnet. That's indeed where deposits and redemptions happen. If you want to use the exchange rate to value wstETH on other chains (Base, OP mainnet, Arbitrum, etc.), you need a trusted source of what the actual exchange rate is since you can't call the Lido contract directly, because it doesn't exist on these L2s. That's where Chainlink comes in: they've created wstETH/stETH feeds and deployed them on the L2s. They call them [exchange-rate oracles](/resources/glossary#oracle-vs-market-price) because they're not tracking secondary market trades, but just reporting what the exchange rate of wstETH-stETH is on Ethereum mainnet. On mainnet, you have the option of trading the wstETH/ETH loop on Morpho (labeled with `94.5% E`) which just tracks the exchange rate directly, with no deviation (that's because it's on mainnet, where you can get the exchange rate directly form the ultimate source of truth, the Lido contract). Aave also uses same exchange rate Chainlink oracles on L2s. ### Why am I at a loss even if the ROE is always positive? 1. When you open, close or modify a position, a swap needs to happen. This normally occurs for the full size of your position, not just your margin. Which means that, with leverage, even a small difference in your entry price gets amplified (e.g. a 0.1% difference at 10x leverage moves your ROE by 1%). Basically, when entering a position you will always have a negative PnL because you’ll be crossing the spread and incur fees (swap fees + flash loan fees which are free 99% of the times). 2. Market impact also plays a role: for instance, long-tail assets or some L2s markets might have thinner liquidity. Illiquid markets will give you a bigger market impact, which can bring your PnL down. 3. Sometimes the spot price sourced from dexes can be far off from its *oracle price*. Contango always sources the best price available, and it even tells you when it’s too far off from the oracle price, but finally you are the one who should decide if you’re ok with it or not. 4. PnL can be displayed using an *oracle price* (used by lending markets to value your debt and liquidate) or a *market price* from a dex source (used by Contango when closing or modifying your trade). Ideally, Contango would always show the market price because it is way more accurate, but it’s too computing-intensive. This is why the default is the oracle price, which can indeed be off sometimes, but hey, just toggle the market one. 5. Any action on Contango that requires a swap is susceptible to MEV attacks. Users that don’t know this tend to think they’ve been robbed of some PnL, while in reality they just got sandwiched. So, if you're trading on mainnet we highly recommend using a MEV-protected RPC. 6. Rates, not just price, can suffer from *market impact*. When you are trading with size, you can easily move the rates on the underlying lending market. Thankfully, Contango shows you the market impact on rates on the trade ticket, to prevent you from entering a bad trade and diluting the yields of other users. What happens sometimes is that users ape into a given trade because they see a nice ROE, but don’t check the market impact, and then they realize they’ve flipped the rates and complain about a decrease in returns. Contango’s interface has been built with lots of community inputs, from traders and farmers alike. Plenty of metrics are currently displayed on the UI, some of which have never been shown before in defi (like the 𝘮𝘢𝘳𝘬𝘦𝘵 𝘪𝘮𝘱𝘢𝘤𝘵 𝘰𝘯 𝘳𝘢𝘵𝘦𝘴). We do our best to help traders understand all the variables that underpin their trades. If you still have questions about the above, please reach out on Discord. We’re always happy to mansplain things. ### How can I move my position to a different wallet? All positions are [tokenized as an NFT](/resources/glossary#tokenized-nft-position) held in your wallet. You can transfer this NFT to a different address through these options: 1. Use the built-in UI transfer option: in the Open Position list click the *three dots* > *Transfer position* > input an address and execute. 2. If you're using Rabby as a wallet, you can head to your transaction history and click on the NFT of your position (called "CTGP" as in Contango Position) and then "send". Enter the new address and then "send" again. 3. If you're savvy enough, you can also call the `safeTransferFrom` method on the NFT contract ([example](https://arbiscan.io/token/0xc2462f03920d47fc5b9e2c5f0ba5d2ded058fd78#writeContract) on Arbitrum). Once the transfer transaction goes through, if you connect with the new address you'll see the position under your *Open Position* list. Please note: * The transaction history of the position is not imported to the new address. * **on-chain rewards**: can only be claimed by the address that owns the NFT, so if you transfer the NFT, you transfer the associated rewards accumulated so far. * **off-chain rewards & points:** it depends on how the third-party protocol is tracking them. We see two main possibilities:\ a) they behave like on-chain rewards and hence are transferred to the new wallet.\ b) they're recognized as two different things, so rewards accrued up to the transfer will belong to the old address, and new rewards will belong to the address that now holds the NFT. The exact moment of the switch is not necessarily the transfer block, but whenever third-party protocols *see* the change. We believe scenario b) is the most likely, but we can't guarantee this will be the case for everyone as each partner will likely implement its own solution. If you fear losing accrued off-chain rewards or points we recommend you not to transfer your position to a new address. ### How can I know the proxy address of my position? On Contango each position is held by a proxy address. Sometimes it might be useful to know the proxy (e.g. for debugging reasons). To find your proxy, simply find the tx when the position was created: the second address on the second line is your proxy, as explained [in this detailed tx analysis](/basics/how-does-it-work/detailed-tx-analysis). ### How can I know if I got sandwiched? [Sandwich attacks](https://coinmarketcap.com/academy/article/what-are-sandwich-attacks-in-defi-and-how-can-you-avoid-them) are not a new problem and are widely present in defi, especially on mainnet. A lot of times these attacks go unnoticed because it’s hard to see the history, state, and results of one’s transactions. However, Contango makes that very evident, and hence this type of attacks are easier to spot on your trades. Still, this remains a problem that affects the majority of crypto protocols and it's beyond Contango's control. If you're trading on mainnet it is highly recommended to use a MEV protected RPC.\ \ There isn't really a rule of thumb to know if you got sandwiched. A good one is to find the tx on etherscan and copy the id; then go to the tx block and from there to the list of transactions; use ctrl+f and search for yours (you might need to look across multiple pages); when you find it, you can check what transactions happen before and after, and if you find a pattern (e.g. same contract before/after) you probably were sandwiched. Another way of inferring this is to check if your entry price was above whatever price you would get simulating a new trade. ### How can I perform simple actions on my debt position? 1. **To partially repay debt on your position and hence decrease leverage while keeping your size constant**: go to your position on the advance page and click on the three dots, then 'Modify'; once the 'Modify' dialog opens up, slide the leverage bar down and the UI will ask you to deposit some funds. To fully repay your debt, slide the leverage all the way down to 1x. Then hit the 'Close' button and select the base currency you want to retrieve. {% embed url="" %} 2. **To decrease the margin on your position and hence increase your debt while keeping your size constant**: go to your position on the advance page and click on the three dots, then 'modify'; once the modify dialog opens up, slide the leverage bar up and the UI will tell you how much you can withdraw. 3. **To modify your leverage and change your total position size without adding collateral**: go to your position on the advance page and click on the three dots, then 'modify leverage'; once the modify dialog opens up, slide the leverage bar to the desired outcome. ### How can I decrease my borrowing cost? Sometimes borrowing rates can spike, which in turn negatively impacts your PnL. To reduce the impact of a high borrowing cost you can: * Migrate your position to another market with better rates, via the 'migrate' option. * Repay part of your debt by deleveraging, as explained in the FAQ above (point 1). ### As an asset issuer, how can we list our asset on Contango? Ideally, asset issuers should meet the following criteria: 1. List the asset as a collateral on a lending market supported by Contango (check the UI), and have at least $1M in borrowing liquidity for a sustainable amount of time. 2. A liquid spot venue on one or multiple dexes. Contango integrates [Balmy.xyz](https://balmy.xyz/) as a meta-aggregator to solve for spot swaps. Balmy should be able to solve a swap of the base currency (your asset, aka the collateral) for the quote currency (the borrowed asset) and viceversa. 3. In case a native minting mechanism is available, we recommend integrating with [Enso Finance](https://www.enso.build/) to provide a spot trading route that has no slippage and hence is cheaper than regular swapping on a dex. 4. If the asset is yield-bearing, an API to query the yield is highly desirable. 5. The resulting yield (the [net APY](/resources/glossary#apy)) of the loop should be attractive enough to compete against current instruments and be sustainable over the long-term. 6. If looping the asset manually earns points, a soft confirmation that those points will also accrue to Contango users is required to speed up the listing process. A proper backend integration to track points can be achieved later (see this [dev doc](https://docs.google.com/document/d/1-FfC8ijPiaqdsnhciZ1Z2xWORfOakCMIzbllL1pwUqM/edit?usp=sharing) for API instructions on how to map Contango's proxies to EOAs). 7. Incentives to kickstart market activity are welcomed and can either be distributed via the Contango [distributor contract](/basics/key-features/incentives-and-rewards/incentive-layer) or on the underlying money market. ### How does the Morpho Public Reallocator work? The Morpho public allocator allows liquidity to be shared between different markets. For instance, let's say there is an available liquidity of 10 ETH on the weETH/ETH market and 10 ETH on the wstETH/ETH one. If you need to borrow 15 ETH to open a looping position on wstETH/ETH then there would not be enough liquidity available on the wstETH/ETH market. In this case the Morpho public allocator would allow you to use some ETH liquidity from the weETH/ETH market in the wstETH/ETH one to open your position. When trading on Morpho, on both Mainnet and Base, Contango uses the Morpho public allocator to provide deeper liquidity and better rates and the Contango front-end takes into account the potential reallocation when providing you with a quote (i.e. the different rates and available liquidity takes into account the reallocation). Please bear in mind: * Bringing some liquidity from market B to market A, while wanting to open a position on A, may give you better borrowing rates on A. * While this may look advantageous, if you have a position on B, and liquidity is reallocated from B to A, then your borrowing rate would increase in B. * Anyone can use the Morpho public allocator, including risk curators who may want to target specific rates. All the information on the public allocator could be found on Morpho docs [here](https://docs.morpho.org/overview/concepts/public-allocator/).

# PT instruments {% hint style="warning" %} Disclaimer: the information provided below is for research purposes only. It should not be used as investment advice. Trading on leverage carries significant risk. If you are a beginner DO NOT trade on leverage. Trading PTs on leverage is not for everyone. DYOR and monitor your position frequently. {% endhint %} Some basic terminology: * *base* = the main asset you’re longing or shorting * *quote* = the asset your pair is quoted against Example: PT-sUSDe/USDC: * *base* = PT-sUSDe * *quote* = USDC ### Overview Trading PT instruments on leverage feels like a mix between perps and dated futures, as one leg of your trade earns a fixed yield, and the other leg pays a variable borrowing cost. Given their nature, PT instruments are meant for long-term trades, where you hold your position until maturity. Here’s a detailed explanation of how these instruments work and what to expect when trading them. As a reminder, Principal Token (PT) represents the principal portion of an underlying yield-bearing asset. Upon maturity, PT can be redeemed at 1:1 for the accounting asset, which appears in brackets at the end of each PT name on [Pendle](https://app.pendle.finance/). For instance, 1 PT sUSDe (USDe) is equal to1 USDe staked in the Ethena protocol at maturity.
PT-sUSDe (USDe) yield on Pendle app

PT-sUSDe (USDe) yield on Pendle app

Since they’re stripped of their variable yield component, PTs can be acquired at a discount (read: with a fixed yield) compared to the underlying asset. Like [zero-coupon bonds](https://www.investopedia.com/terms/z/zero-couponbond.asp), the value of a PT will approach and ultimately match 1:1 the value of the accounting asset at maturity. You can find more info directly on [Pendle docs](https://docs.pendle.finance/pendle-v2/ProtocolMechanics/YieldTokenization/PT). PTs have been made available as collateral on lending markets such as Aave, Euler, Morpho. Users can thus lever up on the fixed yield of PTs by recursively borrowing a quote asset, converting it to more PT and lending it to amplify their exposure. This is called [looping](https://medium.com/contango-xyz/what-is-looping-78421c8a1367). Instead of doing it manually, Contango automates this process in just 1 transaction, but the idea remains the same: by using some margin you get a leveraged exposure to a PT fixed yield. The position you open on Contango or any other looping mechanism has two components: * *Lending*: on one hand, as a base currency you’re lending a PT token which normally earns you nothing in interest, but has an intrinsic fixed yield. * *Borrowing*: on the other hand, you’re borrowing a quote currency at a variable rate. The difference between the two is what Contango displays as [ROE](#id-1c0f) when opening a position. Your profit comes from the yield on PTs minus the cost of borrowing, though exit liquidity, price impact, and fees also affect your final PnL. To fully capture the advertised ROE, you typically need to hold until maturity — since PTs act like zero-coupon bonds and only redeem at face value on expiry — assuming the borrowing rate on the quote asset remains stable and you can exit without significant price impact. {% hint style="warning" %} Exiting early can result in either gains or losses depending on market prices at the time. {% endhint %} Indeed, lots of variables come into play when trading PTs. For instance, here’s a brief recap of what plays in your favour: * Fixed yield of the PT * Leverage on the fixed-yield * PT price appreciating towards 1:1 at maturity * Borrowing rate remaining lower than the PT fixed yield over the lifetime of the position * Quote and base currencies are the same Here’s what plays against you: * High borrowing rate that eats into your profit * YT speculation driving YT price up (due to points farming) and PT price down * Market impact on any spot swap (due to a liquidity crunch or an exotic trade) * Quote and base currencies are different * Contango fees * Depeg events Below we delve deeper into some of these points to help you craft your next PT trade. ### 1️⃣ Base asset selection First, choose your instrument wisely. There are many layers to a PT trade, so pick something you have deep knowledge of. Don’t blindly ape into assets you have never heard before.
PT instruments on Contango

Pick wisely!

For instance, if you decide to loop PT-sUSDe, you need to have a deep understanding of [Ethena protocol](https://ethena.fi/), and think about all the layers that go into this trade: * USDe (Ethena’s stablecoin) * sUSDe (the staked version) * PT-sUSDe (the yield-stripped version of the latter) So you gotta ask yourself: * How is USDe built? Can it depeg? * How’s the yield on sUSDe generated? Is it sustainable? * What variables influence the fixed yield of the PT? * What’s the spot liquidity of all these assets? * What’s the available liquidity to borrow? * Are borrowing rates stable on average? * Is there any unstaking delay? * How easy is to unwind this loop? In other words: you need to research and study the asset you’re trading beforehand. ### 2️⃣ Quote asset selection Choosing the right quote is also key. As a reminder: Contango (or any looping widget of money markets) opens and closes a trade by flash-loaning, swapping, lending and borrowing — all into a single atomic transaction. The swapping part is the tricky bit: every time you cross the spot market you’ll face a bid-ask spread. That’s why, right after opening, your [PnL](/basics/key-features/pnl-computations) is often in the red. What usually makes it worse is leverage, as everything is amplified: a 0.1% spread on an exotic swap can easily turn into a big 1% loss at 10x leverage. Also note: if you enter the trade with something that’s not the PT or its quote currency, you might need to lower the leverage, as the execution might fail due to the [2 slippages](https://docs.contango.xyz/basics/key-features/margin-in-any-currency). When opening a position on Contango you’ll be quoted a spot price (with a ✅ next to it). This entry price can be above or below the mark price. Make sure you’re OK with that price before proceeding. A bad entry is normally equal to a bad trade.
When closing, you should — again — consider market impact on the swap, which depends on whether or not the PT is being quoted against the same underlying asset. For instance, a PT-USDe that is quoted against USDe (so PT-USDe/USDe) does not incur in any market impact post-expiry as Contango just redeems and repays, and no swap is needed. Conversely, a PT for USDe quoted against DAI (so PT-USDe/DAI) needs swapping to repay debt after redeeming, and will thus incur market impact. Also, please make sure you understand the difference between *slippage* and *market impact*. The former is the thing you set on the app; the latter depends on your trade size! [Here](https://help.1inch.io/en/articles/4585109-what-is-price-impact-vs-price-slippage-in-defi) is a good explainer by 1inch. ### 2️⃣ Pricing and duration PTs behave like zero-coupon bonds. The closer they are to maturity, the lower the implied yield and the higher the price. But that’s not often the case on Pendle: sometimes the yield spikes and produces attractive ROEs, which often led users to ape into a trade closer to maturity. In theory, this yield increase might seem counterintuitive given the nature of zero-coupon bonds (where price goes to 1 and yield goes to 0), but in practice there can be other forces at play, putting a downward pressure on the PT price. For instance: 1) speculators tend to purchase YTs closer to maturity, which drives down the respective PT price and increases its yield; 2) some PT loopers tend to exit before maturity and this can increase the yield due to selling pressure on the PT price.

PT-syrupUSDC trended more or less linearly towards 1...

...while PT-wsrUSD had some major hiccups.

So be very mindful of both YT speculation, often driven by points campaigns, and early PT exits from loopers: both can affect the displayed ROEs of new positions and the PnL of existing ones. Also note: YT speculation driving PT price down is beneficial when you’re trying to enter a PT loop, as you’ll get a lower price — but it’s detrimental to your PnL if you’re already into a position. As a rule of thumb, longer durations are generally safer, since market impact and PnL fluctuations can be absorbed over time. With shorter maturities, even if the annualized ROE looks high due to a temporary spike, the actual yield (after [fees](/basics/key-features/fees), spreads, and costs) may be much lower. If you choose to enter a PT trade expiring in less than a month, ensure that the potential upside truly outweighs the risks. ### 3️⃣ Expiry and early exit After expiry, the PT of your position won’t yield anything, but you will still pay for borrowing the quote currency which eats into your profit — so it is recommended to close your position. That said, leaving the position open for a few extra hours typically won’t have a significant impact. Upon expiry, you are required to manually close your position; Contango does not offer automatic closure. When you click *close*, Contango will unwind the position by redeeming the underlying assets and repaying any outstanding debt. However, around expiry, high volatility is expected as many participants will likely want to exit their PT loops. This could lead to thin liquidity in the spot markets, increasing market impact if your quote asset differs from the underlying. Temporary depegs for yield-bearing assets have also been observed during such periods. That’s why some users exit early. Remember that in this case you’ll be subject to the ongoing market price, which, as mentioned, is not guaranteed to be linear. Here’s a few scenarios to consider in case your exit price isn’t great: * You can [repay your debt](https://docs.contango.xyz/resources/faq#how-can-i-perform-simple-actions-on-my-debt-position) by bringing extra capital (use *Modify* on the advanced screen and slide the leverage slider down, it will ask you to deposit) so that you can either fully withdraw your PT or reduce your borrowing costs while you wait for a better exit price. * Wait until the exit price improves, and keep paying borrowing fees — which might eat into your profits. * [Migrate your position](https://docs.contango.xyz/resources/faq?q=migrate#how-can-i-decrease-my-borrowing-cost) to another market — if available. On your open position, Contango shows the *exit price* using a quote from spot markets, to provide the most accurate pricing and ROE. However, the actual *exit price* will be the one you see when you simulate closing on the *Close* or *Modify* dialog with a ✅ icon next to it. ### 4️⃣ ROE computations There is a difference between the ROE of your existing position and the ROE of new positions. When opening, the ROE on Contango is shown using [mark](/basics/key-features/pricing) (read: oracle) price. This is because it’s literally impossible to show a firm *entry price* in advance, across hundreds of instruments. As you enter your trade details, Contango recomputes everything and shows you the actual expected ROE, given you actual *entry price* (the one with a ✅ next to it). Triple-check all metrics before submitting.
The *Advanced* (above, left) and the *Simplified* (right) interfaces both show the entry price with a green checkmark. The ROE shown on Contango when opening is based on two things: 1) the difference in price of the PT you bought vs the price at expiry and 2) the ongoing borrowing rate. So, that ROE value is going to hold true if: you ride this position to maturity; the borrowing rate on the quote asset stays, on average, at the same level; you can close your position without major price impact. The ROE shown on the *Open Positions* list is specific to your position, as it reflects the PT’s fixed lending rate at the time of opening, based on the actual *entry price* you received. As a result, it may differ from the ROE of positions that have not yet been opened. * If you hover over the ROE field in the *Open Positions* list on the *Advanced* page you’ll be able to see what lending rate you’ve locked in on your trade. * If you hover on the *PnL* column of your position, you’ll see a breakdown of what you owe in interest (for borrowing) and what would be the PnL on the PT price movement alone. What is shown on the table is the sum of both.
Contango app showing open positions

Everything is hoverable on the Contango app!

If you use other looping mechanisms, make sure to understand what values are displayed before and after placing a trade. ### 4️⃣ Oracles Oracles have an impact on your liquidation. There are [2 types of oracle feeds](/resources/glossary#oracle-vs-market-price), market and exchange rate feeds. To avoid potential liquidations, it’s advisable to steer clear of market rate feeds. Even minor depegs, where secondary markets trade below the real asset value, could lead to the underlying money market deeming your position eligible for liquidation. Unfortunately, not all money markets surface this information easily and you might have to dig this info by yourself. An excellent [thread by Stephen from Defi Dojo](https://x.com/phtevenstrong/status/1820831789138534647?s=46\&t=oH1r28vi2qiKgxDWHeddHQ) shows you how to find the oracle type across different money markets. ### 5️⃣ MEV attacks If you’re trading on mainnet and don’t use MEV protection, you’re gonna get sandwiched. We’ve seen whales losing fat spreads to MEV bots, and then complaining about their PnL being down. Don’t be that guy and 1) use tight slippage when trading and 2) use an MEV blocker, like [this one from CoWSwap](https://mevblocker.io/). More resources: * [How to check if you got sandwiched](https://docs.contango.xyz/resources/faq#how-can-i-know-if-i-got-sandwiched) * [How to avoid getting sandwhiched](https://cow.fi/learn/how-to-avoid-mev-bots)

Poor guy skyzer.eth was sandwiched both while entering and exiting his trade.

### Conclusions Often PT trades result in a poor experience (read: loss) for uneducated users. So the TLDR is quite easy: make sure to understand all forces at play before trading. If you don’t, avoid PT-trading all together. Contango strives to display the most accurate metrics at all times, given the current limitations of DeFi infrastructure; but the rest is up to you, brother. So: 1. Pick the right base 2. Pick the right quote 3. Pick longer maturities 4. Watch out for market impact 5. Consider an early exit if you can’t handle hectic markets at maturity 6. Know your oracles 7. Watch out for MEV attacks # Troubleshooting ### RPC issues Contango is a decentralized protocol so any querying of data and submitting of transactions happens through an RPC. There may be times when the RPC is not as responsive as it should be, during these times you may notice data being slow to load or not loading on your page. It is also possible to hit rate limits which would result in 429 errors. This is outside of Contango’s control. If the issues persist, you can try another RPC by changing it in the network settings of your wallet. A list of RPC URLs and their statuses can be found on [Chainlist](https://chainlist.org/). ### My PnL looks off The unrealised PnL shown on the interface uses the mark price, which is the same [oracle price](/resources/glossary#oracle-vs-market-price) as the one used by the underlying money market you have selected. This price does not necessarily reflect the actual price in the market since oracles have a certain degree of deviation. Depending on which direction the oracle price is deviating from the [real market price](/resources/glossary#oracle-vs-market-price), when you open a position it'll either show up in red immediately after opening, or green. This doesn't mean that you've actually gained/lost that money. To get an accurate closing price, you'd need to simulate closing your position to get a firm quote. ### My transaction is not going through The Contango UI simulates all transactions before sending them to your wallet. This means that all transactions that reach the stage where the wallet is opened, should be successful. However, there might be cases, outside of Contango control, where the trade fails a slippage check (the price changes drastically in those few seconds between you clicking the button in our UI to when the tx is actually sent off to the chain) but these should be an exception. If this happens, just re-try submitting the trade. ### I’ve just opened a positions and it doesn't show up The Contango interface uses The Graph to show open positions and sometimes there might be a little delay before your position shows up in the ‘Open Positions’ list. Any Graph delay is outside of Contango’s control. If the issue persists, please contact the Contango team on Discord. ### **I’m having issues with Metamak and Rabby** Contango works with most web3 wallets. If you’re having conflict issues with Phantom and Rabby, please disable the Phantom extension. If you’re having conflict issues with Metamask and Rabby and you’d like to use the latter, what you can try is the following: open the Contango app, open *console* by pressing `F12` on Windows or `Cmd+Shift+C` on Mac; go to the *Application* tab; on the left select *Storage*, and on the right panel you'll have a button called *Clear site data*. This will wipe out all the storage created by the app, including the wallet connection, so if you refresh, the app will show up with the 'Connect wallet' button as if it was the first time you use it. Make sure you have Rabby enabled over Metamask and hit 'Connect wallet', the pop-up will ask you if you want Metamask or Rabby, just select Rabby. ### I cannot open a position and get a *Trade simulation failed* message Sometimes you can bump into a message saying "*The contract function "safeTransferFrom" reverted with the following signature: 0x91240a1b Unable to decode signature "0x91240a1b" as it was not found on the provided ABI*." This happens when you try to open a position at max leverage. However, this can only work when the price you get from the market is equal or better than the price the oracle values your asset at. When you get a lower price, you then get less quantity than the one Contango assumed you would have, which is not enough to collateralise the position: in this case the trade simulation fails. Contango already has a small buffer on the max leverage to minimise this from happening, but if the oracle deviation is big enough the error can pop up. In this case, just reduce leverage slightly and it should be fine. ### My wallet has been flagged Contango uses Chainalysis to screen the wallets that interact with its front-end for malicious activity (e.g. interacting with an OFAC sanctioned entity like TornadoCash). Addresses are screened when they connect for the first time to the front-end and also on an ongoing basis. If you get an error saying that your wallet has been flagged it means that Chainalysis has detected potentially suspicious activity. Please reach out to the team if this happens. ### I'm having issues when using the *dex spot market* pricing in the Position List As explained [here](/basics/key-features#pnl-computations), the *dex spot market* source requires API calls that can rate-limit your address and hence is not displayed as a default option. If you're experiencing issues, switch back to the *oracle price* or the *Contango price service*. ### Are you experiencing other issues? Contact us on [Discord](https://discord.gg/x3dync2edA).