Guide: Removing Liquidity
After providing liquidity to a pool it is possible to exit the position partially or completely before the end of the option's life cycle.
When removing liquidity from the pool, you will receive a combination of tokens (options + stablecoins) and the fees generated throughout the trades that happened against the pool.
It is important to highlight that exiting a pool may translate into receiving a different combination of tokens from what you have previously provided. This happens when there was more trading on one of the sides (more selling or more buying) and the pool had an imbalance.
The AMM logic tries to keep the initial exposure within a different final position, this means that the final combination of assets you remove from the pool should represent the same exposure in dollar terms to your initial position.
Soon we'll publish more content about this concept we've been calling "exposure versus position".
Removing Liquidity
To remove liquidity, go to the “Remove” tab. You will be able to remove the tokens provided as liquidity according to the amount you have available in the “Your pool position” section in the “Position” card on the right.
Step 1, drag the round button to the right until you reach the total exposure you want to remove from the pool on both sides.
Step 2 shows you a summary of the liquidity removal transaction that is going through. Please pay attention to the amount being removed. Once sure of the transaction, click on the “Remove Liquidity” button.
Mind that you will be removing shares according to your deposit's initial exposure, which might translate into a different position.
Your position will be updated in the Position card on the right, and the “Liquidity provided” section in the Dashboard.
Removing a different position
If you removed a different position from your initial deposit there are some extra steps you need to do to completely leave the position.
First of all, calculate what is the difference.
Did you get more options tokens than you previously provided or more stablecoins?
If you got more options tokens
In that case, you have to check if the option is still tradable (before the exercise window). If positive, that means that you're able to resell the surplus of options tokens you removed from the AMM. This should then translate this options surplus into a dollar positive return.
If the options are available for exercising, you have to check if they are ITM. If positive, you can exercise the surplus of options and again get back to a dollar positive return.
🚨 Attention🚨
If the option is no longer tradable nor is during its exercise window, unfortunately, you lost the chance to retrieve the dollar return on these options.
If you got more stablecoins tokens
There's no additional actionable required, that represents the impermanent gain already.
Second, get back the collateral minted or exercise options.
Did you lock collateral and mint the options you provided as liquidity or you bought them from the AMM?
If you minted options to provide the liquidity you need to unmint the options to get back the collateral previously locked. If this happens before the exercise window closes, you'll be able to get back your collateral in full, in the collateral asset.
If you just bought the options, you can resell the options tokens in the case are still tradable or exercise the options (if it's during the exercise window).
We did a demo of providing liquidity in the video below:
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