Contango
Contango lets you adjust leverage within the lending market's collateral limits
Contango separates changes to position size from changes to the debt supporting that position. Monitoring starts with the selected lending market, its oracle price and the position's liquidation buffer. Repaying debt can reduce leverage without reducing size; resizing exposure changes a different part of the position. Before confirming either action, examine the resulting debt, liquidation price and execution quote. Afterward, reconcile the transaction with the updated position rather than treating a preview as completion.
Debt repayment and exposure changes serve different purposes
The adjustment that fits depends on whether the intended change concerns outstanding debt, available margin or total exposure. The Advanced interface provides separate controls for these changes.
Changing debt while keeping size constant
Repaying part of the borrowing
The Modify control supports adding funds to repay debt while preserving position size. Lower borrowing reduces leverage under otherwise unchanged conditions.
Withdrawing margin
Withdrawing margin at unchanged size increases debt and leverage. The withdrawal amount must fit the position's collateral constraints.
Changing the amount of exposure
Modify leverage supports changing total position size without adding collateral. Its effect differs from supplying fresh funds for repayment. Compare the resulting size and debt before selecting either operation.
Read the position's identity alongside its risk fields
A useful monitoring record identifies the position, its chain and its lending market before interpreting any displayed balance or liquidation estimate.
The same asset pair can have different conditions across markets. Record the position ID alongside size, margin and leverage so that later changes refer to the same borrowing position. A familiar pair name alone does not establish that two records describe the same exposure.
The Advanced interface's Open Positions list includes positions opened through the Simplified interface. Its transaction history supports filtering by position ID and inspecting transaction details, including cashflow and fees. This connects the current position to the actions that changed it.
Which price determines liquidation risk?
The underlying lending market's oracle price determines liquidation eligibility, so the market-specific mark price matters more for this task than the chart.
Charts provide an indicative price that need not match the selected lending market. A firm modification quote serves another purpose: it describes the proposed spot execution. Differences between these prices can affect whether a transaction leaves enough collateral to support its debt. A favorable chart movement therefore does not establish that the position has gained borrowing capacity.
Compare that valuation with the position's liquidation price. Keep the execution quote separate when assessing the cost of changing exposure.
The liquidation buffer measures distance, not time
A liquidation buffer describes price headroom under the position's conditions; it does not specify how long that headroom will remain available.
Adverse price movements and borrowing costs can weaken a position. The maximum leverage allowed when opening also differs from the leverage associated with liquidation. Where a lending market lacks a separate opening cushion, Contango applies an additional buffer. Its size can vary by instrument, so a single percentage does not describe every position.
Liquidation penalties also follow the underlying market's rules. A position close to its boundary may incur those penalties before a pending adjustment completes. No monitoring interval reserves an opportunity to intervene.
Interest can change the position between adjustments
When borrowing costs exceed the income supporting a position, carrying it erodes equity even without an adverse move in the displayed asset price.
The funding calculation reflects cashflows from the lending and borrowing legs. Annual percentage yield, or APY, expresses that relationship against position notional. Return on equity, or ROE, uses initial margin as its denominator. Comparing the percentages without their calculation bases can obscure how much borrowing supports the position.
An adjustment can also change the rates it encounters. The trade review shows estimated market impact on rates, reflecting the proposed lending and borrowing amounts. That estimate deserves attention when resizing: the rate displayed before entering a size may differ from the rate for the completed trade.
Margin compatibility affects whether an adjustment can execute
Additional funds help only when the modification accepts their currency and can complete any conversion required for the selected position.
The modification ticket supports the currencies that appear in its dropdown. Entering with a currency other than the pair's base or quote can require extra swaps. Those swaps introduce another liquidity requirement and may increase market impact. A wallet balance in an unrelated currency therefore does not establish that repayment can proceed.
A missing quote leaves the proposed adjustment unresolved. Using an accepted base or quote currency may remove an extra conversion, but it does not guarantee sufficient liquidity or a valid transaction. The resulting quote must still support the intended modification.
A repayment check when currency support limits the choice
For an existing position that needs less borrowing, currency compatibility determines whether adding funds can achieve repayment without changing position size.
- Match the selected position ID, chain and lending market to the position being adjusted.
- Confirm that the modification accepts the funding currency and produces any required conversion quote.
- For repayment at unchanged size, use Modify and lower the leverage slider to see the required deposit.
- If the conversion cannot obtain a quote, reassess an accepted funding currency before submitting.
- Before submitting, review the resulting debt, liquidation price and any required swap quote, and complete any required token authorization using a method compatible with the token and wallet. After successful execution, compare the recorded debt reduction, unchanged size and recalculated liquidation fields.
A compatible deposit supplies funds for repayment; reduced debt then changes the leverage supporting the existing exposure. If conversion liquidity disappears, the original proposal no longer establishes that repayment is executable. A different accepted currency may remove that conversion requirement, while the lending market's constraints still apply.
Completion means that the confirmed transaction and updated position show the intended repayment. It does not mean that the remaining exposure cannot lose value.
Execution limits can block an otherwise sensible reduction
A modification that requires a spot swap still needs sufficient liquidity and an execution price that satisfies the transaction's limits.
Liquidity belongs to the selected instrument, market and chain. Aggregate liquidity elsewhere does not establish that this particular adjustment can execute. Slippage settings constrain the swap, while the review also shows the trade's estimated effect on lending rates. These describe different costs and should not substitute for one another.
Widening slippage tolerance permits a worse execution price; it does not create liquidity. A liquidity shortage can also constrain an exit. An attempted reduction remains an attempt until the chain records successful execution and the position reflects the change.
Authorization and transaction success describe different states
Permission to spend a token enables an operation, but the permission itself does not repay the position's debt or change its collateral.
Token permits and on-chain approvals
A permit grants spending permission through a signed message. An approval sets an allowance through an on-chain transaction. Completing either step alone does not demonstrate that the position adjustment occurred. The selected authorization method must also work with the token and wallet involved.
An executed position change
The position-changing transaction supplies the relevant completion record. A submitted transaction, a successful approval and a revised preview describe different states. When the interface appears unchanged, inspect the transaction linked to that position before treating another submission as necessary.
Even after a successful transaction, compare the new balances with the intended operation. A lower displayed leverage value alone does not establish whether debt fell, exposure changed or both occurred.
Separate adjustment completion from full position closure
A partial repayment leaves a position to monitor; full closure unwinds the borrowing and releases the remaining equity through the selected exit currency.
Closing reverses the position-building mechanism. The amount available afterward depends on debt repayment and execution, so an earlier profit estimate is insufficient evidence of settlement.
For valuation before an exit, the DEX Spot Market pricing option estimates execution more directly than an oracle-based profit figure. Funding also accrues within profit and loss and settles through partial or full closing. Those figures help explain the transaction, but the completed record establishes what actually changed.
Reconcile closure against the original position ID: outstanding borrowing, remaining exposure and returned funds should match the completed action. For a partial adjustment, retain that same ID for subsequent monitoring.
Contango - your questions answered
Does a 1x short position still have liquidation risk?
A 1x short can still carry liquidation risk because the short structure retains borrowing. Contango constructs shorts through the inverse asset relationship, so the displayed multiplier does not establish that the position has no debt. The outstanding borrowing and applicable liquidation price determine whether further monitoring remains necessary.
Are earned rewards automatically added to a position's liquidation buffer?
Third-party rewards are not automatically compounded into the position by Contango. Their displayed value therefore does not establish additional collateral or debt repayment. Claiming frequency and availability depend on the reward arrangement, and a separate reward balance should not substitute for the lending market's position balances.
Why can reducing exposure incur a service fee?
Changing position size through the app can incur a service fee even when the change reduces exposure. The applicable treatment depends on the instrument, discounts and any qualifying exceptions. Read the proposed transaction's fee breakdown; reducing risk does not make the execution free.
Can closing a position leave a small claimable balance?
Closing into the base currency, or the quote currency for a short, can leave a claimable residual balance called dust. When repayment requires selling collateral, the transaction may sell slightly more than the debt ultimately requires. Contango records the remainder separately for the user. This residual balance differs from an outstanding borrowing position.
Is a positive ROE enough to show that a principal-token position remains healthy?
A positive ROE does not establish that a principal-token position has sufficient liquidation headroom. Its return estimate involves the entry price, borrowing costs and maturity assumptions. Oracle valuation can expose the position to liquidation during a price dislocation even when the intended holding period ends at maturity.