Short positions

ShortPositions lets an address short a Stock Token on its own margin. It borrows the token from the margin accounts' lending vault for that asset, sells it through the token's Uniswap v3 pool for USDG, and keeps the USDG as collateral. It is each lending vault's borrower, so the fee a lender earns is what the shorts pay.

Open and close a short#

Add USDG margin, then sell. Quote the sale first so the call carries a minimum.

import { shorts } from '@tapehouse/sdk'

const account = wallet.account.address

await wallet.writeContract(shorts.deposit(deployments, { asset: 'TSLA', amount: 500_000_000n, account }))

const { minProceeds } = await shorts.quoteSale(publicClient, deployments, {
  asset: 'TSLA',
  amount: 10n ** 18n,
  slippageBps: 50n,
})
await wallet.writeContract(shorts.sell(deployments, { asset: 'TSLA', amount: 10n ** 18n, minProceeds, account }))

The deposit is 500 USDG (6 decimals). The sale borrows one TSLA token (18 decimals) and sells it. USDG must be approved to the contract before deposit. To close, quote the buy-back and call cover:

const { maxCost } = await shorts.quoteCover(publicClient, deployments, {
  asset: 'TSLA',
  amount: 10n ** 18n,
  slippageBps: 50n,
})
await wallet.writeContract(shorts.cover(deployments, { asset: 'TSLA', amount: 10n ** 18n, maxCost, account }))

Read the short with shorts.position (USDG held, what it owes in the token, borrow shares, book epoch) and shorts.health (equity and requirement at the band's high edge, in USD with 18 decimals, plus the engine's missing bits and regime).

How a short works#

• One short per token. Each address holds, for each Stock Token, one short of that token alone, with USDG as its only collateral: the margin it adds and the proceeds of what it sold. Nothing here deposits into or borrows from the supply vault, and no margin account position is touched.
• Authorization. An address that an account authorized in the margin accounts (setAuthorization) may also sell, buy back, deposit and withdraw for it here. The accounts' guardian pauses new shorts and withdrawals from open ones as it pauses loans.
• Selling. sell borrows amount and sells it through Uniswap's SwapRouter02 for no less than the band's low edge, or the band's centre while the asset is restricted.
• Buying back. cover buys back up to what the short owes and repays the vault. A partial buy-back also pays no more than the band's high edge, so it never leaves the short weaker. Buying back all it owes, or so much that it retires all its borrow shares, closes the short.
• Margin. The engine margins a short as a negative quantity at the band's high edge. A sale or a withdrawal must leave its equity at or above its requirement, and within the weekend leverage cap from the regular open on the last trading day before a closure, while the band is not halted, no multiplier change is pending, the session is known and the pool's depth is read.
• The fee. It accrues in the vault, in the token, so a short owes its share of the vault's debt as borrow shares. The debt is counted in raw units of the token, so a dividend or split leaves the count owed as it is.

Functions#

symbol is the asset's symbol as bytes32; the SDK takes the plain string. For every call that takes account, the caller is the account or an address it authorized.

Reads#

The matching SDK reads are shorts.position, shorts.health, shorts.epoch, shorts.book, shorts.restriction and shorts.fee.

Rules and limits#

A fall of 10%. Once the band's centre falls 10% from the asset's last close, a short sells at no less than the band's centre for the rest of that day and the next, in UTC. The close is the last centre the contract recorded on an earlier day. Every sale records one, and mark lets anyone record it.

Recalls. When a lender's recall notice runs out and anyone calls the vault's buyIn(ticket), the shorts buy in what is due through the pool, using only that token's shorts' USDG, and repay it. Each short pays its part of the cost in proportion to its borrow shares, when it is next touched. While the issuer has paused the token or blocklisted the contract, nothing is bought in and the notices keep running.

Books. Each token's shorts share a book: their borrow shares, their USDG and the cost index of the buy-ins. Once the vault is owed nothing while borrow shares remain, the next sale opens a new book (NewEpoch). The earlier shorts owe nothing and take out what they hold.

Liquidation. A short falls short when its equity is below its requirement at the band's high edge while the market is open, and at both edges while it is not. The liquidator waits while the pool asks more than a liquidation may pay (AboveLimit).

Who bears a loss. A short whose USDG cannot buy back all it owes spends all of it, and the rest is written off on the vault, a loss to its lenders. A short can also owe more of the buy-ins than it holds. At its liquidation the book's other shorts are charged that amount and owe that much less of the token, written off too, so the lenders bear it as far as those shorts still owe the vault. Until it is liquidated, such a short closes only by liquidation (Insolvent), and the book cannot pay out what it no longer holds (DeficitOpen).

Events#

Errors#

Next#

• Stock lending
• Liquidation
• Short and baskets
• List shorts