Leverage

Deposit $1,000 at 5x and you control $5,000 worth of an asset. Gains and losses both multiply.

Every trade defaults to 1x. No leverage, no liquidation risk. Just buying and selling like a normal brokerage.

When you want more, you turn it on.

How It Works

Deposit $1,000 USDC. At 1x that gives you $1,000 of exposure. At 5x that gives you $5,000. Your deposit is your margin (the collateral backing the position).

Example: $10,000 collateral at 5x on Realty Income (xO). Realty Income goes up 4%. You make $2,000, a 20% return on your collateral. It drops 4%? You lose $2,000.

Smart Margin

Navy does not use a flat margin ratio like traditional brokers. The protocol looks at how volatile an asset is and sets the margin accordingly.

A stable company might allow 4:1 or higher. A volatile asset gets tighter margin, maybe 2:1. This adjusts automatically as market conditions change.

Same approach prime brokers use, except the margin engine is on chain.

Liquidation

Liquidation is when your position is automatically closed because your collateral has dropped too low.

If the price moves against you and your collateral drops below the maintenance level, the protocol closes your position. Remaining collateral (minus losses) returns to your balance.

Concrete example: You deposit $10,000 and open a 5x long ($50,000 position). The asset drops 15%. Your loss is $7,500. The protocol liquidates your position. You get back roughly $2,500 minus a small liquidation bounty (a reward paid to the liquidator who closed your position). At 1x there is no liquidation risk.

No phone calls. No 2 day wait. Instant.

When to Use It

Trade discounts. A company trades at 25% below what its assets are worth (NAV). If you believe the gap will close, leverage amplifies the return. It also amplifies the loss if the discount widens.

Dividends on leverage. A company yields 12% a year. At 3x that is 36% gross yield on your collateral, minus the funding rate. If the position moves against you, losses can exceed the dividend income.

Short premiums. If you believe a premium is unsustainable, you can short it with leverage. If the premium widens instead, losses multiply.

The Funding Rate

The funding rate is the cost of being on the popular side. Every 8 hours, the side with more open interest (the total value of all open positions) pays the other.

When the market is balanced, funding is cheap. When it is skewed (most traders on one side), funding gets expensive.

Example: Total open interest on xARCC is $10M. $8M is long, $2M is short. The market is skewed long. Longs pay shorts. If the 8 hour funding rate is 0.05%, longs collectively pay $4,000 to shorts that period. This incentivizes more traders to short, which balances the market.

This replaces the 8 to 12% margin rate that banks charge. It is set by the market, not by a bank.