# 6. Liquidity Structure

LP-deposited reserves (R) serve band trades (T) across a range of strikes (s). The protocol maintains two pools:

* **Long pool:** strikes ranging from 0% to +100% from the prevailing perp mark price
* **Short pool:** strikes ranging from 0% to –100% from the prevailing perp mark price

The reserves available at each strike are calculated as:

* **Long pool:** $$\mathbf{R\_s = R + \sum T(\le s)}$$
* **Short pool:** $$\mathbf{R\_s = R + \sum T(\ge s)}$$

In the long pool, reserves at a given strike include the base LP reserves plus the cumulative value of all trades at or below that strike.

In the short pool, reserves include base LP reserves plus cumulative trades at or above that strike.

## Liquidity Providers (LPs)

LPs deposit capital into pools, providing the base reserves that underpin band pricing and trading capacity. LPs can take on leverage synthetically, amplifying both yield and exposure to pool P\&L.

LP returns are composed of transaction fees. Pool’s intrinsic and extrinsic exposure are hedged on the perp exchange (*Hyperliquid*).

Pool NAV is tracked continuously. When new LPs enter, existing LP shares are diluted proportionally. LP entry and exit follow the current NAV per share.

<br>


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.temporal.exchange/6.-liquidity-structure.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.