13. Tactful Leverage Usage

Key Benefits of Leverage

Most advantages conferred by leverage are interrelated and revolve around the central premise of capital efficiency.

Increased Buying Power

Trading perps with leverage at enables you to increase your purchasing power by an order of magnitude. With more buying power, you can increase your market exposure and, thereby, the magnitude of your potential returns.

Reduced Capital Requirements

Initial margin requirements on Zeta allow you to control a trade value 10x greater than the USDC collateral required to open the position. Minimized initial margin requirements allow you to spread capital evenly across strategies.

Capital Efficient Hedging

Hedging can erode profits and limit growth if done in a capital-intensive manner. Perps are uniquely well-suited for hedging, thanks to their compatibility with leverage and lack of settlement date.

Profiting from Acute Volatility

Trading perps with leverage can be a profitable gambit for traders with short-term directional inclinations, as even slight price fluctuations can result in dramatic profits. Predefined exit strategies are your friend on this front.

Preventing Liquidation

To properly manage risk, it's essential to understand the conditions under which your account will become subject to liquidation. Additionally, you should take a calculated approach to determine how much leverage to use when opening positions. Monitoring your margin ratio throughout the lifespan of your trades will give you an opportunity to top up your account with USDC and bolster your liquidation buffer if needed.