Liquidation of Short Position on NFT

As the short position is realized through leverage borrow as explained in the previous page, the carry of the short position is essentially the carry of the “End Position” in Chart 1 on the page. Therefore, liquidation of short position on NFT will be done in the reverse fashion as NFT-collateralised loan. Specifically, liquidation is triggered when the health factor of the loan falls below 1. See Liquidations page for details.

Note here the liquidation of short position is very similar to the “leverage repay” as shown in the previous page. Such liquidation is much less risky than that of a loan collateralised by NFT, as the definition of “floor price” is the minimum ask price of an NFT within the collection, and the NFT that bears such ask price can be immediately purchased with that exactly ask price when liquidation of short position is triggered. In turn such NFT can be deposited back to the (borrowable pool of the) platform.