> For the complete documentation index, see [llms.txt](https://docs.mooncake.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.mooncake.fi/core-mechanisms/minting-redemption-of.../leveraged-token.md).

# Leveraged Token

As a holder of Leveraged Positions, all positions are stored in the Leveraged Vault, and users receive Leveraged Tokens minted to their addresses.

#### Minting / Buying Process

1. A trader deposits Underlying Tokens.
2. The tokens are split into a Funding Position and a Leveraged Position.
3. The Funding Position enters the AMM and is swapped into additional Leveraged Positions based on the current exchange rate.
4. The trader’s holdings are now entirely in Leveraged Positions.
5. These Leveraged Positions are deposited into the Leveraged Vault, and the trader receives corresponding Vault Tokens (Leveraged Tokens).

#### Redemption / Selling Process

When a trader redeems or sells Leveraged Tokens, the process works as follows:

1. The trader’s Leveraged Tokens represent a share of the Leveraged Positions stored in the vault.
2. A portion of these Leveraged Positions is swapped into Funding Positions via the AMM.
3. The resulting Funding Positions are combined with the remaining Leveraged Positions to reconstruct the Underlying Token.
4. At this point, the Leveraged Token is fully converted back into the Underlying Token, which is returned to the trader.

<figure><img src="/files/fP5V2WsLZHhF6y69ka3b" alt=""><figcaption></figcaption></figure>


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