Bybit Smart Leverage: High leverage for volatile markets

Bybit Smart Leverage is a structured product that lets traders take high-leverage directional positions on select cryptocurrencies. This article explains how Smart Leverage works, its payoff mechanics for long and short positions, key benefits and risks, and how to buy or redeem a plan.

Key Takeaways:

• Bybit Smart Leverage is a non-principal-protected structured product that allows traders to open high-leverage positions (up to 200x) on selected cryptocurrencies with protection from liquidation before settlement.

• Early redemption is available when the calculated payoff is greater than zero, but is unavailable starting one hour before settlement.

• Maximum loss is capped at the initial investment amount. The product has no additional fees.

What is Bybit Smart Leverage?

Bybit Smart Leverage is a non-principal-protected structured product that allows traders to take directional positions using leverage of up to 200x on selected cryptocurrencies. Positions are protected from liquidation before settlement, making this product suitable for traders who want high-leverage exposure without the risk of premature liquidation caused by short-term price fluctuations.

Smart Leverage also offers early redemption, which lets traders exit a position before the settlement period ends, provided the calculated payoff is greater than zero. Starting one hour before settlement, early redemption is unavailable. Note that a positive payoff can still be below the initial investment, so redemption does not necessarily mean making a profit.

Bybit Smart Leverage is available on both Bybit web and Bybit App.

How does Bybit Smart Leverage work?

Bybit Smart Leverage has a unique approach to managing profit and loss (PnL) scenarios for both long and short positions. To help with your understanding of Bybit Smart Leverage, the following are some terms you need to know.

Breakeven price: The settlement price at which the payoff equals your initial investment, with no profit or loss. For long positions, this is above the entry price, and for short positions, it's below. The quoted breakeven price changes before purchase based on volatility and the time remaining until expiration. Once an order is confirmed, it remains fixed.

Current price: The current mark price of a Perpetual contract.

Settlement price: This is determined by calculating the average of the Derivatives Index Price every second for 30 minutes before expiration.

Here's how long and short scenarios proceed:

For long positions:

For short positions:

This mechanism allows traders to strategically leverage their positions up to 200x, significantly amplifying their potential gains or losses. The maximum risk is the loss of the initial investment amount in adverse market conditions. There are no additional product fees for Smart Leverage.

Benefits of using Bybit Smart Leverage

The advantages of using Bybit Smart Leverage include the following.

High leverage: Magnify your potential returns through leverage up to 200x.

No liquidation before settlement: Short-term market swings won’t trigger liquidation of your position.

Early redemption: Exit your position before settlement when the calculated payoff is greater than zero. Early redemption uses the index price at the time of redemption (rather than the 30-minute average used at expiration), and actual proceeds may differ slightly, capped at 0.5%. Starting one hour before settlement, early redemption is unavailable.

Clear risk management: Maximum potential loss is made known clearly upon purchase, enabling you to make informed decisions based on your risk tolerance.

No product fees: There are no fees associated with purchasing or holding Smart Leverage products.

Risks of using Bybit Smart Leverage

Bybit Smart Leverage is not principal-protected. If the settlement price is below the breakeven price for a long position or above it for a short position, you may lose part or all of your investment. With high leverage, even a small unfavorable difference from the breakeven price can reduce the payoff to zero. For example, using the formulas above, a 200x position loses the entire investment when the settlement price is at least 0.5% below breakeven for a long position or at least 0.5% above it for a short position. Protection from liquidation before settlement does not prevent a total loss at settlement.

How to use Bybit Smart Leverage

To purchase a Smart Leverage product, you’ll need a Bybit account, and you must complete Level 1 Identity Verification (KYC). Business Identity Verification is also supported. Once your identity has been verified, follow the steps listed below.

Buying a Smart Leverage plan

Step 1: From Bybit’s homepage, navigate to Finance → Advanced Earn → Smart Leverage. On the App, navigate to Assets → Earn → Advanced Earn → Smart Leverage.





Step 2: Explore the available products and select the one you would like to purchase. After selecting your preferred product, tap on Buy Now.

Step 3: Enter the amount you would like to invest, tick the acknowledgement box and tap on Buy Now.

Step 4: Review your order details and tap on Confirm.

Notes:

• Before placing your order, use the provided simulator (in Step 3) to estimate potential P&L by selecting the coin, indicating the direction and entering the investment amount.

• The breakeven price is determined by various factors, including volatility and time remaining until expiration, and is calculated in real time.

• Profit is only realized when the settlement price exceeds the breakeven price in the corresponding direction.

Viewing your orders

Access your current orders by tapping on View my orders on the final confirmation screen (shown after you place each Smart Leverage order). Alternatively, you can access your orders via Assets → Invested Products, then click on the relevant Smart Leverage product.

Settlement proceeds are credited to your Funding Account 15 minutes after settlement.

Early redemption

Step 1: Access your orders (per the Viewing your orders section above).

Step 2: Tap on the relevant order, then tap on Redeem.

Step 3: Confirm the redemption request by tapping on Confirm.

Notes:

• There may be a slight discrepancy in actual proceeds, capped at 0.5%, due to market movement.

• Early redemption isn't possible if the calculated payoff is negative or equal to 0. Additionally, early redemption is unavailable starting one hour before settlement.

Should you use Bybit Smart Leverage?

Bybit Smart Leverage is best suited to traders who are comfortable with high-risk, high-reward strategies, and who are adept at navigating volatile market conditions. It's particularly beneficial for those looking to capitalize on sharp price reversals in V-shaped markets, without the constant fear of liquidation.

However, it's advisable for traders to thoroughly understand the mechanics of Smart Leverage and to proceed with caution, particularly if they're less experienced with leveraged trading.

The bottom line

Bybit Smart Leverage provides high-leverage exposure to selected cryptocurrencies, without liquidation before settlement, while capping the maximum loss at the amount invested. With leverage of up to 200x and the option for early redemption, it offers flexibility for traders with strong directional conviction. However, the use of leverage amplifies both gains and losses, so it's important to understand the product's mechanics and to assess your risk tolerance before getting started.

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