Health Factor

The health factor is the single number that determines whether your position is safe or liquidatable. It measures the ratio of your risk-adjusted collateral to your outstanding debt.

✦ Key Takeaways

HF ≥ 1.0 — your position is safe, no liquidation possible
HF < 1.0 — your position is liquidatable by anyone, instantly
Target: keep above 1.2 — gives you buffer for price swings and interest accrual
Cross-margin — all deposited positions contribute to one combined health factor

Formula

Health Factor = Σ(Position Value × Liquidation Threshold) / Total Debt

Where:
├── Position Value = shares × min(spotPrice, twapPrice)
├── Liquidation Threshold = tier-specific (55%, 70%, or 85%)
└── Total Debt = borrowed amount + accrued interest

If your health factor drops below 1.0, anyone can liquidate your position. There's no queue, no warning period, no grace. Everything else in risk management flows from this single threshold.

What Moves HF Down

Your health factor decreases when your collateral value drops or your debt increases. Five common causes:

Cause	Effect	How fast
Position price drops	Collateral value ↓	Immediate — tracks oracle price
Interest accrues	Debt ↑	Continuous — compounds per-second
You withdraw collateral	Collateral value ↓	Immediate — on transaction
Market approaches resolution	Early-closure factor reduces effective LTV	Gradual — linear decay over 7 days
Oracle becomes unavailable	That collateral = $0 borrow power	Immediate — after staleness window

What Moves HF Up

You can actively improve your health factor through these actions:

Action	Effect
Repay debt	Debt ↓ — most direct way to improve HF
Add collateral	Collateral value ↑ — deposit more PM positions
Position price rises	Collateral value ↑ — passive improvement

HF Zones

Think of your health factor in four zones:

Health Factor	Status	Recommended Action
> 1.5	Safe	Monitor normally
1.2 – 1.5	Caution	Watch market moves closely
1.0 – 1.2	Warning	Consider repaying debt or adding collateral
< 1.0	Liquidatable	Liquidation can happen at any moment

Keep your health factor above 1.2 at minimum. This gives you margin for price swings, interest accrual, and early-closure decay. A sudden 15% price drop at HF 1.2 would bring you to ~1.02 — still safe but barely.

Worked Example

Let's walk through a concrete scenario showing how HF changes with market movements.

Portfolio: $600 in Moderate tier (65% LTV / 70% liq threshold)
Debt: $300 USDC borrowed

Collateral value = $600 × 0.70 = $420  (using liq threshold)
Health Factor = $420 / $300 = 1.40 ✅ Safe

Portfolio drops to: $480
Collateral value = $480 × 0.70 = $336
Health Factor = $336 / $300 = 1.12 ⚠️ Caution zone

→ You should consider repaying some debt or adding collateral.

Portfolio drops to: $432
Collateral value = $432 × 0.70 = $302.40
Health Factor = $302.40 / $300 = 1.008 🚨 Danger!

→ One more small move and you're liquidatable.
→ Interest accrual alone could push you under 1.0.

Use readAccountSnapshot() from the TypeScript SDK to check your current health factor programmatically. Build alerts for when HF drops below your comfort threshold.