Long Farming

What is Long Farming?

Long farming enables traders to profit from asset price appreciation alongside liquidity mining rewards. Using the SOL/USDC pair as an example, you can borrow USDC to purchase SOL, then supply both tokens to the Meteora DLMM pool. If SOL’s price rises, your position will sell SOL at higher prices within your specified range, generating profit from price gains. Additionally, you earn trading fees throughout this process. This strategy combines the advantages of limit orders with passive fee generation.

Key Parameters of Long Farming (SOL/USDC example):

1. Collateral & Leverage Ratio

   1. Determines total position size.

   2. Higher leverage increases liquidation risk.

2. Borrow Ratio

   1. Specifies which asset you borrow.

   2. Higher USDC borrow ratio increases SOL exposure.

3. Deposit Ratio

   1. Defines the SOL/USDC ratio in your final position.

   2. Higher SOL ratio increases exposure by allocating more funds to purchase SOL.

   3. A 100% SOL ratio maximizes SOL exposure.

4. Price Range

   1. Sets the price range where you form the LP position and sell SOL.

Example:

• Deposit: 1000 USDC

• Borrow: 1000 USDC

• Price range: above current price (LiquidX swaps your deposit and borrowed USDC into SOL)

This creates a position worth $2000 in SOL deployed above the current price. If SOL’s price rises above this range, your position continuously sells SOL at higher prices and thus generating profit. Besides trading profits, you also earn trading fees from forming LP.