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Trading Basics ​

This page explains how swap positions work, how PnL is produced, and how risk is enforced.

1. Core Contract ​

Concept ​

A Jetty position exchanges a fixed rate against a floating oracle index over a chosen tenor.

Example ​

  • Pay fixed / receive floating: benefits when floating realization is above your locked fixed rate.
  • Receive fixed / pay floating: benefits when floating realization is below your locked fixed rate.

Technical Detail ​

  • notional > 0: pay fixed, receive floating.
  • notional < 0: receive fixed, pay floating.
  • Position collateral and PnL live inside a margin account.

2. Market Structure ​

Concept ​

Markets are rolling instruments. The market account persists, while each position has its own expiry bucket.

Example ​

In a market with daily buckets and a 365-day window, you can pick any valid daily-aligned expiry inside that window.

Technical Detail ​

  • One pool can host multiple markets under the same quote token.
  • All tenors draw from the same unified liquidity pool, but each tenor interpolates its rate from the 8-knot curve engine.
  • Longer tenors have higher carry-equivalent exposure and typically face more price impact.

3. Pricing and Liquidity ​

Concept ​

Pricing comes from the curve engine's 8-knot term structure and 3-tranche Impact Kernel, not an order book or real reserve swaps.

Example ​

A larger trade pushes further along the curve and receives a worse fixed rate than a smaller trade, all else equal.

Technical Detail ​

  • The Impact Kernel consumes carry-sized notional (pricing notional) for impact calculation.
  • Risk-increasing trades are constrained by DV01 reserve and utilization scaling.
  • Risk-reducing trades can access full allocated depth.

4. Settlement and PnL ​

Concept ​

Settlement is accounting-based. The program updates position and market accumulators instead of transferring tokens at every funding event.

Example ​

When oracle index rises between touches, pay-fixed positions receive funding; receive-fixed positions pay funding.

Technical Detail ​

text
funding_delta = notional * (index_now - index_last)
  • Funding and fees accumulate in position.realized_pnl_wad.
  • Unrealized MTM uses current mark rate and time to expiry.
  • Deposits and withdrawals are explicit token-movement instructions.

5. Margin and Liquidation ​

Concept ​

Health determines whether a position can stay open or add risk.

Example ​

If mark moves against your position and health falls below zero, a liquidator can close enough notional to restore health.

Technical Detail ​

  • Initial margin gates risk increases.
  • Maintenance margin gates liquidation eligibility.
  • Health checks run before and after risk-increasing swaps.
  • Risk-reducing swaps remain available in stressed states.

6. Execution Checklist ​

  1. Select market and expiry.
  2. Verify wallet network and collateral balance.
  3. Review quoted fixed rate, fee, and margin impact.
  4. Submit swap.
  5. Monitor realized_pnl_wad, unrealized MTM, and health.
  6. Close or reduce before expiry when operationally possible.

7. Operational States ​

  • Normal: opening and closing allowed.
  • ClosingOnly: only risk-reducing swaps.
  • Halted: trading disabled, liquidation path may remain enabled by config.

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