> For the complete documentation index, see [llms.txt](https://documentation.ivx.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://documentation.ivx.fi/0dtes-market-dynamics/positions-payoff.md).

# Positions Payoff

### Maximum P\&L Framework for long positions

Long positions have  theoretically unlimited upside potential, we will therefore initiate IVX markets with a framework for setting this maximum P\&L in terms of observable market variables and a defined shared benefits between IVLP deposited and protocol traders. This framework involved calculating the maximum P\&L as an implicit option long traders are selling to the IVLP and solving for the maximum P\&L in terms of premium from there.

The four distinct trade types (defined from the perspective of a trader) with their respective maximum liabilities to the IVLP are:

* **Long Call:** Without a maximum P\&L the potential IVLP liability is uncapped. With the maximum P\&L parameter in place, the maximum P\&L in percent is $$Pmax\_{longCall}$$ 
* **Long Put:** Without a maximum P\&L the potential IVLP liability is 100% of the reserved amount. With the maximum P\&L parameter in place, the maximum P\&L in percent is $$Pmax\_{longPut}$$ 
* **Short Call/Put:** Without a maximum P\&L the potential IVLP liability is the Premium percent of notional. With a maximum P\&L in place this could be contained further, but there are some user experience issues to doing this.

By that:

* Long positions $$P\&L\_t = Min\[\ Premium\_t - Premium\_0;  maxPNL(k)\ ]$$$$p(0)$$
* Short position $$P\&L\_t =  Premium\_0 - Premium\_t$$

and at expiry

* Expiry Pay off $$P\&L = Min\[maxPNL(k), (b/s) \times (Spot - Strike)], 0] - P(0)$$

> $$maxPNL(k)$$ is defined per strike price delta at the moment of opening the position 

{% hint style="info" %}
If users had opened positions by the time the epoch ends, their trades undergo the settlement process, in which they are not allowed to resume trading activity in the next epoch until the positions are closed, even if they were carried to the next epoch.
{% endhint %}

### Impact of Maximum P\&L Width on IVLP Risk and Return

The width of the maximum P\&L affects the risk of the IVLP pool as this maximum P\&L implicit option will offset some delta and gamma risk in the pool, where the tighter the maximum is set, the greater the offset on average. 

The overall return of the pool is also increased as the value of this option will realize over time and over a long enough time horizon it will have the effect of an explicit trading fee. We are projecting this as a healthy dynamic balance between potential trader upside realtive to the risk absorbed by IVLP, and can be modified in the future acording to community and data feedback

E.g: The payoff for a long call position with a maximum P\&L in place is shown in the diagram below.

<figure><img src="/files/aQALigUpFMFOMRybXzTf" alt=""><figcaption></figcaption></figure>

Token Payoff:

<table><thead><tr><th width="43">Position</th><th width="298">Position</th><th>Token Payoff</th></tr></thead><tbody><tr><td></td><td>Buy Call</td><td>Volatile Token</td></tr><tr><td></td><td>Sell Call</td><td>Stablecoin</td></tr><tr><td></td><td>Buy Put</td><td>Volatile Token</td></tr><tr><td></td><td>Sell Put</td><td>Stablecoin</td></tr></tbody></table>

{% hint style="info" %}

* Max PnL Rate: 900% for ETH BTC HYPE SOL
  {% endhint %}

**IVX market benefits from the fees generated down below:**&#x20;

* Entry fee
* Exit fee
* Fixed settlement fee
* liquidation fee
* IVLP mint fee
* IVLP redeem fee

Where:&#x20;

* 50% of fees collected and distributed to IVLP holders
* 50% of fees collected will be held in the insurance fund

{% hint style="info" %}
ETH + BTC + SOL\
\
**Open** buy call - Buy put fees = 0.25%\* Notional value

**Close** buy call - Buy put fees = 0.1%\* Notional value\
\
HYPE + BERA\
\
**Open** buy call - Buy put fees = 0.325%\* Notional value

**Close** buy call - Buy put fees = 0.125%\* Notional value<br>

ETH + BTC + SOL

**Open** sell call - Sell put fees = 0.05%\*Notional value

**Close** sell call - Sell put fees = 0.05%\*Notional value<br>

&#x20;HYPE + BERA\
**Open** sell call - Sell put fees = 0.065%\*Notional value&#x20;

**Close** sell call - Sell put fees = 0.045%\*Notional value<br>

Settlement fee for Buy positions = 0.04%\*Notional value

Settlement fee for Sell positions = 0.03%\*Notional value&#x20;

Liquidation fee = 2$
{% endhint %}


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://documentation.ivx.fi/0dtes-market-dynamics/positions-payoff.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.