> For the complete documentation index, see [llms.txt](https://docs.temporal.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.temporal.exchange/6.-liquidity-structure.md).
# 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.
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