Boros locks the funding rate, but it only locks the calculation basis for your settled cash flows. It does not lock your margin health. Liquidation depends on whether your "net balance falls below the maintenance margin." That net balance has two parts: cumulative profit and loss already settled into your collateral, and unrealized floating profit and loss. Locking the rate fixes the rule for the first part, but settlement itself keeps eating into or adding to your collateral. At the same time, unrealized PnL moves with the marked rate inside the Boros market, which is not the same thing as the rate you locked on the underlying exchange. Both of these paths can push your net balance below the maintenance margin and trigger liquidation, even if you have "locked the rate."
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Settlement Itself Changes Your Collateral
A Boros position is essentially an interest rate swap. Someone who shorts YU (pays floating, receives fixed) compares the underlying market's actual funding rate with the fixed APR locked at entry during each settlement cycle. The difference is settled in cash and directly added to or subtracted from your collateral. The settlement interval depends on the underlying market: Binance settles every 8 hours, and Hyperliquid settles every 1 hour.
The problem is that locking the rate does not mean the settlement result will be in your favor. Suppose you short YU and lock in a 10% fixed APR because you believe future funding rates will be below 10%. But if the actual underlying rate stays above 10% at settlement time, you pay the difference every cycle, and your collateral is steadily eroded. Pendle's documentation puts it bluntly: a position that is continuously losing money will see its collateral cut every cycle. If this continues, the position can be pushed toward liquidation even if the marked rate does not change at all.
This is where "locking" becomes misleading. You locked the fixed leg, but the floating leg settles every 8 hours, and the settlement result is determined by the underlying market's actual rate, not by your locked price. The locked price is only a benchmark, not a guarantee.
Unrealized PnL Follows Boros's Own Marked Rate
The marked rate used for liquidation on Boros is the 5-minute time-weighted average of the most recent traded price on Boros's own order book, not the funding rate on Binance or Hyperliquid. Your net balance equals collateral plus unrealized PnL, and unrealized PnL moves with this marked implied APR.
This means that even if the underlying funding rate behaves exactly as you expected and settlement cash flows are in your favor, the implied APR on the Boros market can still move against you because of other traders' buying or selling pressure, liquidity changes, or market sentiment. That can widen your unrealized losses. In extreme cases, short-term swings in the marked rate can push your net balance below the maintenance margin and trigger liquidation. Pendle's documentation also warns that if the underlying APR moves sharply against your position, it can quickly erode collateral and increase liquidation risk.
Liquidation Trigger Conditions and Consequences
When the net balance falls below the maintenance margin, the position becomes liquidatable. Liquidation is triggered when the Health Factor drops to 0. The formula is 1 - (maintenance margin / net balance). At liquidation, the position is closed at the current marked rate and a liquidation penalty is charged. The penalty coefficient k starts at 25% when the position first becomes liquidatable (health ratio = 1.0) and rises linearly to 50% as distress deepens.
The penalty is deducted from your remaining collateral. This means liquidation not only takes away your position but also further reduces the assets you get back. Pendle's documentation explains that the liquidation design is intended not to worsen the liquidated user's health ratio, but the penalty itself is a real cost.
When Locking the Rate Still Makes Sense
If your purpose in shorting YU is to hedge the funding rate payments on your perpetual contract, rather than simply betting on the direction of the rate, then locking the rate turns your future funding payments into a fixed amount and removes the uncertainty of a sudden rate spike. That is the real use of locking: converting a floating expense into a fixed expense for easier budgeting and risk management.
But locking does not remove the risk that if the underlying rate stays above your locked price, you still have to settle the difference and your collateral is still eroded. If the margin for your perpetual hedge leg and your Boros position is managed separately, the collateral on the Boros side can be consumed by settlement while profits on the perpetual side may not be moved over in time to top up margin. That friction in fund transfers is itself a liquidation risk.
If you are only speculating on the direction of the rate and have no corresponding hedge leg, then "locking the rate" is just an entry price for you. You are betting that future actual settlement rates will be lower than that price when you are short, or higher when you are long. The liquidation risk comes from how quickly settlement losses and marked rate movements together consume your margin after you bet in the wrong direction.
What to Watch When Judging Liquidation Risk
Do not only look at the gap between your locked fixed APR and the underlying current rate. On Boros, you should watch the Health Factor and the liquidation implied APR. The liquidation implied APR tells you what marked rate level would trigger liquidation. The Health Factor tells you how much buffer you still have before reaching that level. These two indicators change whenever each settlement changes your collateral balance. They are not fixed after you open the position.
If your position has a corresponding perpetual hedge leg, you also need to look at the margin on both sides together. Whether settlement losses on the Boros side are offset by profits on the perpetual side depends on whether you can move funds in time. In extreme market conditions, when both sides need margin at the same time, the delay in moving funds is itself a risk.
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References
- Pendle Documentation·Funding Rate Settlement, 2026-11-02
- Pendle Documentation·资金费率结算, 2026-11-02
- Pendle Documentation·Margin & Liquidations, 2026-11-02
- Pendle Documentation·第 7 章 - 保证金与清算, 2026-11-02
- Pendle Documentation·Chapter 7 - Margin and Liquidations, 2026-11-02
- Pendle Documentation·Deleveraging and Liquidation Mechanism Disclosure, 2026-11-02
- Boros Docs·Boros Overview, 2026-11-02
- Pendle Documentation·Boros Overview, 2026-11-02
