Long & Short
Using Hundred Finance to leverage trade
To long or short an asset, in general terms, is to place a bet on whether its price will go up or down in the future. Unlike trading between assets, where a "good trade" necessitates taking into account the changes in value of two tokens versus a unit of account, longing and shorting allows you to focus purely on the price future of one versus a unit of account. The mechanism of placing a long or a short trade entails borrowing and thus acquiring debt and then trading that token either to or from the unit of account. As carrying out this process can increase one's supplied collateral, this practice can also be used to carry out leverage trading.
Due to borrowing being a key aspect of leverage trading, Hundred Finance, as a lending protocol, can be used as a means to long and short with leverage and has a number of advantages over other tools like centralized exchange platforms (CEX) and other lending protocols. These include:
- Low cost/high reward: As Hundred Finance rewards the staking of stables, we aim to possess the deep stablecoin liquidity that makes the cost of borrowing incredibly competitive. On top of this, if your collateral is a stablecoin, it is possible to stake a portion of it for HND returns in response to the asset being shorted falling in price along with the amount of funds required to collateralize the borrowing position.
- Low transaction fees: As Hundred Finance is focused on chains able to offer low transaction fees, it is possible to adjust leveraged positions cheaply and easily. This is in stark contrast to the Ethereum mainnet, where carrying out simple tasks such as repaying a loan can often cost hundreds of dollars (eating into potential profits or compounding losses).
- Decentralization: Unlike a CEX where you are reliant on the platform in question authorizing your withdrawals in line with their policies, Hundred Finance is a trustless protocol deployed on decentralized blockchains.