Position Limits

Overview

PIPO implements position limits to manage concentration risk, prevent market manipulation, and ensure fair access for all participants.

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Limit Structure

By User Type

User Type	Single Position	Underlying Total	Platform Total
Retail	$100K	$500K	N/A
KYC Verified	$500K	$2M	N/A
VIP (KYB)	$5M	$20M	N/A
Institution	Custom	Custom	Custom

By Position Type

Position	Limit Rationale
Call Warrant	Capped by SPV inventory
Put Warrant (Buy)	User limit + pool availability
Put Warrant (Write)	KYB required, minimum $50K
LP Position	No limit (beneficial for liquidity)

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Concentration Limits

Per-Underlying

Concentration Risk Management:

Single User Limits (% of pool):
├── Retail: Max 5% of any pool
├── KYC Verified: Max 10% of any pool
├── VIP: Max 25% of any pool
└── Institution: Negotiated (typically 40%)

Platform Limits:
├── Single underlying: Max 60% of total TVL
├── Top 3 underlyings: Max 80% of total TVL
└── Reviewed quarterly

Example

Scenario: SpaceX Call Pool TVL = $5M

User Limits:
├── Retail user: Max $250K position (5%)
├── KYC user: Max $500K position (10%)
└── VIP user: Max $1.25M position (25%)

If user already holds $200K:
├── Retail: Can add $50K more
├── KYC: Can add $300K more
└── VIP: Can add $1.05M more

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Implementation

Real-Time Checking

// Position limit check on every trade
function checkPositionLimit(
    address user,
    address warrant,
    uint256 amount
) internal view returns (bool) {
    uint256 currentPosition = balanceOf(user, warrant);
    uint256 newPosition = currentPosition + amount;

    UserTier tier = getUserTier(user);
    uint256 poolTVL = getPoolTVL(warrant);

    uint256 maxPosition = getMaxPosition(tier, poolTVL);

    return newPosition <= maxPosition;
}

// Tier-based max position
function getMaxPosition(UserTier tier, uint256 poolTVL) internal pure returns (uint256) {
    if (tier == UserTier.RETAIL) return poolTVL * 5 / 100;      // 5%
    if (tier == UserTier.KYC) return poolTVL * 10 / 100;       // 10%
    if (tier == UserTier.VIP) return poolTVL * 25 / 100;       // 25%
    return type(uint256).max;  // Institution - custom
}

User Notification

┌─────────────────────────────────────────────────────────────────┐
│              ⚠️ POSITION LIMIT WARNING                          │
├─────────────────────────────────────────────────────────────────┤
│                                                                 │
│  Your order exceeds position limits.                           │
│                                                                 │
│  Order Details:                                                │
│  ├── Warrant: SPACEX-CALL-200B-Q42025                          │
│  ├── Order Amount: $300,000                                    │
│  ├── Current Position: $200,000                                │
│  └── Requested Total: $500,000                                 │
│                                                                 │
│  Your Limits (Retail Tier):                                    │
│  ├── Single Position Max: $250,000 (5% of pool)               │
│  └── Available to Add: $50,000                                 │
│                                                                 │
│  Options:                                                       │
│  ├── [Reduce Order to $50,000]                                 │
│  ├── [Complete KYC for Higher Limits]                          │
│  └── [Cancel Order]                                            │
│                                                                 │
└─────────────────────────────────────────────────────────────────┘

---

Upgrade Path

Tier Progression

Tier Upgrade Path:

RETAIL (Default)
├── Limits: $100K position, 5% pool
├── Requirements: None (wallet connect)
└── Upgrade: Complete KYC →

KYC VERIFIED
├── Limits: $500K position, 10% pool
├── Requirements: Identity verification
├── Process: ~24 hour approval
└── Upgrade: Complete KYB →

VIP (KYB)
├── Limits: $5M position, 25% pool
├── Requirements: Entity verification, accreditation
├── Process: ~5 business days
├── Benefits: OTC desk, physical delivery
└── Upgrade: Custom agreement →

INSTITUTION
├── Limits: Custom (negotiated)
├── Requirements: Institutional agreement
├── Process: Manual onboarding
└── Benefits: API access, prime brokerage

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Anti-Manipulation Rules

Wash Trading Prevention

Wash Trading Detection:
├── Same wallet buying and selling rapidly
├── Related wallets trading with each other
├── Circular trading patterns
└── Volume without price impact

Consequences:
├── Warning (first offense)
├── Trading suspension (repeat)
├── Permanent ban (confirmed manipulation)
└── Loss of LP rewards

Front-Running Protection

Front-Running Mitigations:
├── Private mempool (Flashbots-style)
├── Randomized transaction ordering
├── MEV rebate to users
└── Time-weighted execution for large orders

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Special Situations

Event Windows

During Exercise Windows:
├── Position limits unchanged
├── No new purchases allowed (for expiring series)
├── Selling/exercising allowed
└── Concentration limits relaxed for settlement

Market Stress

During High Volatility:
├── Limits may be reduced by 50%
├── New positions paused temporarily
├── Existing positions honored
└── Communication via all channels

---

API Reference

Check Position Limit

const limit = await pipo.checkPositionLimit({
  user: '0x...',
  warrant: 'SPACEX-CALL-200B-Q42025',
  amount: 300000
});

// Response
{
  allowed: false,
  currentPosition: 200000,
  requestedAmount: 300000,
  newPosition: 500000,
  userTier: 'RETAIL',
  maxPosition: 250000,
  maxAddable: 50000,
  reason: 'EXCEEDS_TIER_LIMIT',
  upgradeOptions: ['COMPLETE_KYC']
}

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Next Steps

• Circuit Breakers
• Liquidity Risk
• Oracle Committee