Ola Finance
  • Welcome to Ola Finance
    • Introduction
    • Peer-to-Pool Lending
    • Lending vs Swapping
  • For Users
    • Lending
    • Borrowing
    • Liquidations
    • Advanced Strategies
    • RainSPIRIT
      • RainSPIRIT Holders
      • Projects Seeking Voting Power
  • For Creators
    • Building a Lending Network
    • Under the Hood of a Lending Network
    • Rainmaker Program
    • Business Model
  • Governance
    • Scope
    • Local Governance
    • Global Governance
  • Community
    • Glossary
    • FAQs
  • Deployed Smart Contracts
    • ApeSwap Lending Network
    • SpiritSwap Lending Network
    • Hector Lending Network
    • Frax Lending Network
    • OolongSwap Lending Network
    • BeamSwap Lending Network
    • KnightSwap Lending Network
    • BabySwap Lending Network
    • USDFI Lending Network
    • Agola Ecosystem
  • Security reports
    • Audit Reports
    • Token Report
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On this page
  • Create Short Positions
  • Create Leveraged Long Positions
  • Create a Leverage Cycle
  1. For Users

Advanced Strategies

A Few Use Cases for Advanced Borrowing

In this section, we will briefly look at how someone can use a lending network to their advantage. Before reading these, it is important to first read the sections on Lending, Borrowing, and most importantly Liquidations to understand the risks involved.

Create Short Positions

Shorting a token is the act of betting against it; in other words, you make money if the value of the token decreases.

To short ETH, one could deposit USDC as collateral and borrow ETH against it. Let's say they borrow 5 ETH. They would then sell the 5 ETH for USDC. If the price of ETH were to fall, they could buy back the 5 ETH for less USDC, therefore closing their borrow position and pocketing the difference.

Create Leveraged Long Positions

Leverage uses a loan to buy more of an asset, thus increasing exposure and potential profits (but also losses).

To leverage a long ETH position, one could deposit ETH and borrow USDC against it. They would then use that USDC to buy more ETH. If the price of ETH were to rise, a portion of the ETH obtained could be sold to pay off the USDC loan, thus keeping the additional ETH as profit.

Create a Leverage Cycle

After creating a long or short position that uses leverage, one can cycle this leverage to further intensify their exposure to the position. For example, a user creating a short position against ETH would supply USDC, borrow ETH against it, then sell the ETH. To enter a leverage cycle, they would then supply the USDC generated from the ETH sale as additional collateral to borrow even more ETH, and repeat the cycle as many times as they choose. As each deposit of collateral allows for a smaller borrow position, there is a limit on the number of cycles that can be performed.

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Last updated 3 years ago