LP Token Price
The LP token price reflects the value of each LP token in USD terms. It increases as the Vault earns fees and when traders close at a loss.
Formula
LP Token Price = Total Liquidity / Total LP Tokens
What Moves LP Token Price
| Event | Effect on LP Price |
|---|---|
| Borrow fee collected | Increases (fee added to total liquidity) |
| Trader closes at a loss | Increases (lost collateral added to pool) |
| Trader closes at a profit | Decreases (profit paid from pool) |
| New deposit | Neutral (both numerator and denominator increase proportionally) |
| Withdrawal | Neutral (both decrease proportionally) |
Example Over Time
| Event | Total Liquidity | Total LP Tokens | LP Price |
|---|---|---|---|
| Initial | 1,000 | 1,000 | 1.000 |
| Trader loses $50 | 1,050 | 1,000 | 1.050 |
| Borrow fee: $10 | 1,060 | 1,000 | 1.060 |
| New LP deposits $100 | 1,160 | 1,094.3 | 1.060 |
| Trader profits $30 | 1,130 | 1,094.3 | 1.033 |
Notice that LP price can go down when traders profit. This is the core risk of being an LP.
Checking LP Token Price
You can check the current LP token price on the Vaults page.