Leverage trading

Leverage amplifies your exposure to plDXY-BEAR or plDXY-BULL. A 3x leveraged BEAR position gains (or loses) three times as much as holding BEAR directly.

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Opening a Leveraged Position

BEAR Leverage — Amplified exposure to USD weakness

1. You deposit USDC as principal

2. The router borrows additional USDC via flash loan

3. All USDC is swapped to plDXY-BEAR on Curve

4. BEAR is staked (splDXY-BEAR) and deposited to Morpho as collateral

5. The router borrows against your collateral to repay the flash loan

6. You now have a leveraged BEAR position with Morpho debt

BULL Leverage — Amplified exposure to USD strength

1. You deposit USDC as principal

2. The router borrows additional USDC via flash loan

3. All USDC mints token pairs via the Splitter

4. The plDXY-BEAR is sold on Curve for USDC

5. plDXY-BULL is staked (splDXY-BULL) and deposited to Morpho as collateral

6. The router borrows against your collateral to repay the flash loan

7. You now have a leveraged BULL position with Morpho debt

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Closing a Leveraged Position

When you close, the router unwinds your position in a single transaction:

1. Flash loan/mint to get working capital

2. Repay your Morpho debt

3. Withdraw your staked collateral

4. Convert everything back to USDC

5. Repay the flash loan

6. Return the remaining USDC to you

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Understanding Leverage Multipliers

Leverage	Your USDC	Borrowed	Total Exposure
2x	$1,000	$1,000	$2,000
5x	$1,000	$4,000	$5,000
10x	$1,000	$9,000	$10,000
11.8x	$1,000	$10,800	$11,800

Higher leverage means higher potential gains—and higher potential losses. Your borrowed amount accrues interest over time.

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Liquidation Risk

Morpho monitors your position's health. If your collateral value drops too far relative to your debt, your position can be liquidated.

What affects liquidation risk:

• BEAR positions: Liquidation risk increases when USD strengthens (BEAR price falls)

• BULL positions: Liquidation risk increases when USD weakens (BULL price falls)

• Accrued interest: Your debt grows over time, gradually increasing risk

Monitor your health factor. The interface warns you when your position approaches unsafe levels.

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Slippage Protection

All leverage operations enforce a maximum 1% slippage cap. This protects you from MEV extraction and unfavorable price movements during execution.

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Key Differences from Spot Positions

Aspect	Spot	Leveraged
Upside	1x	Up to 11.8x
Downside	1x	Up to 11.8x
Liquidation risk	None	Yes
Ongoing costs	None	Borrow interest
Collateral	None	Staked tokens in Morpho