Impermanent loss on same-stock pools

What is impermanent loss?

Impermanent loss is the gap between the value of your LP position and the value you would have had by simply holding the same tokens. It happens because, as the relative price of the two tokens moves, the pool sells the token that is getting more expensive and buys the one getting cheaper. If the price returns to where you entered, the gap closes; if you withdraw while it is open, it becomes a real loss.

Does impermanent loss apply to same-stock pools?

Yes, impermanent loss applies to same-stock pools, but usually less than in a stock/USDC pool, because the two tokens track the same share and trade near 1:1. It appears whenever one issuer's token trades at a premium or discount to the other, for example TSLAx a little below TSLA.

What causes the price gap between two tokens of the same stock?

The gap comes from differences between the issuers and their markets, not from the stock itself.

• One version has more buyers, or more liquidity on other venues.
• Minting and redemption are slower or harder for one issuer, so arbitrage takes longer.
• An issuer pauses, freezes or restricts its token.
• Weekends and market closures, when the underlying share does not trade and onchain prices can drift.

How big can impermanent loss get in a narrow range?

In a narrow range, the worst case is that the price crosses your whole range and your position ends up entirely in the cheaper token. Illustration, not a prediction: with a Wide range of about ±1% opened at 1:1, if TSLAx falls to 1% below TSLA and stays there, the position holds only TSLAx and is worth about 0.25% less than holding the original mix. A narrower range reaches that point after a smaller move.

Can trading fees make up for impermanent loss?

Trading fees can offset some or all of impermanent loss, but not always. Fees depend on volume and on how long your range stays active; impermanent loss depends on the price path. The fee APR estimates in SoFinance ignore impermanent loss, so compare both. Fees not guaranteed.

How can I limit impermanent loss on a same-stock pool?

You can limit impermanent loss by choosing a range that fits how far the pair usually moves, watching for issuer events, and sizing the position so you can wait out a temporary gap.

• Wider presets leave range less often and lose less per move; narrower ones collect more per dollar while in range.
• SoFinance's suggested preset is scored on 7 days of fee data; it does not move later, so check the position yourself.
• Withdrawing as the two pool tokens costs 0 in SoFinance fees, so you are not forced to sell into the gap.