How to Leverage Trade on Solana with Synthetic Assets
Amplify your positions using L/S tokens and lending protocols
Learn how to use Continuum synthetic tokens as collateral on Solana lending protocols to create leveraged positions without liquidation cascades.
Step-by-Step Guide
Mint L/S Tokens
Deposit stablecoins into Continuum to mint paired Long and Short tokens. For example, depositing 1000 USDC for synthetic gold gives you equal amounts of GOLD-L and GOLD-S tokens.
Start with a smaller amount to understand the mechanics before scaling up.
Sell the Short Token
On Jupiter or any Solana DEX, sell your Short token (GOLD-S) for USDC. You now have directional long exposure to gold.
Check liquidity depth before selling - larger positions may need to be split.
Deposit Long Token as Collateral
Deposit your Long token (GOLD-L) into a Solana lending protocol like Kamino or Marginfi as collateral. These protocols require overcollateralization - typically 130-150% of your borrow amount must be deposited as collateral.
Different protocols offer different LTV ratios (50-75% typical). Higher LTV = more capital efficient but riskier. Compare Kamino vs Marginfi rates.
Borrow USDC Against Collateral
Borrow USDC against your deposited Long token. Due to overcollateralization requirements, if you deposit $1000 of GOLD-L, you might only borrow $600-750 USDC (depending on the protocol's LTV for that asset).
Keep your health factor above 1.5 to survive volatility. Overcollateralization protects you but reduces capital efficiency.
Repeat for Desired Leverage
Loop the process: mint more L/S tokens → sell Short → deposit Long → borrow USDC. Each loop increases your effective leverage.
Most traders stay at 2-3x leverage. Higher leverage means higher liquidation risk.
Risks to Consider
- Liquidation risk if the underlying asset drops significantly
- Overcollateralization requirements reduce effective leverage - 150% collateral ratio means max ~1.5x from one loop
- Smart contract risk across multiple protocols (Continuum + lending protocol)
- Interest rate fluctuations on borrowed USDC can eat into profits
- DEX slippage when selling Short tokens at scale
Practice With These Assets
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