We had the first battle test of LLP Strategies in the last several hours. TLDR: it worked as expected and protected LLP holders as well as traders. Deep dive in this thread.

Over a few days, a trader built up a very large long position in ARC relative to the size of the market. Around 600 other traders and market makers on Lighter took the other side of the trade, ultimately reaching total Open Interest of 50M USDC.

LLP Strategies limit downside while still maintaining the upside. Each market belongs to a strategy, and users can see the allocated USDC for each strategy on the LLP page, under the strategies page.

The ARC perp was under strategy 7, which had 75k USDC in it. This means that only 75k of LLP deposits can be at risk if LLP were to take on this position and get ADL'd.

As the ARC price fell around 6PM ET, first the big long position was liquidated in the order book for about 2M USDC.

Initially, LLP was up on this position, but then the price fell further, and as soon as LLP strategy 7 was depleted, another ADL was triggered. Healthy short positions were the counterparties of LLP getting ADL'd, this time at 0.071123.

Therefore, LLP had upside in the case if the price had rebounded quickly, but its downside was quite limited. In the end, the big long trader lost around 8.2M USDC, LLP lost 75k, and the short traders who took the risk of betting against this position were profitable.

If traders have additional questions about LLP Strategies, please file a ticket in Discord.