Let's take SOL-USDC for example. If you decided to farm $X dollar of SOL-USDC, Apricot usually helps you get approximately $X/2 dollar of SOL and $X/2 dollar of USDC.
If you have these tokens in your deposit, Apricot will first use your SOL and USDC deposit positions. However, if you do not have or do not have enough of these tokens in your deposit, Apricot will help you borrow the additional amounts of SOL and USDC to make up for a total of $X/2 dollar of SOL and $X/2 dollar of USDC.
These $X/2 dollars of SOL and $X/2 dollars of USDC will then be deposited into the corresponding LP pool to generate new LP tokens. Apricot will then deposit these LP tokens back into your Apricot account, and use these as collateral.
The LP tokens deposited on Apricot are automatically farmed and auto-compounded to give you higher yields.
What happens when I redeem my LP token deposits?
Apricot will stop farming the portion of LP that you are redeeming, and redeem the LP token back to its constituents. For example, when you redeem your SOL-USDC LP, you will receive SOL and USDC in your Apricot account.
When SOL-USDC LP is redeemed, if you have any borrow position in SOL or USDC, these SOL and USDC tokens returned will first be used to repay your borrow positions. Any amount remaining will then be added to your deposit positions.
After redemption, additional imbalances appeared in my account. What happened?
LP tokens represent shares of liquidity pool, and the balance within a liquidity pool can change depending on market situation. If we take SOL-USDC LP as an example, it is possible that, when you started farming, each LP corresponds to 1 SOL and 100 USDC. If the price of SOL rises and the liquidity pool's balance changes, it is possible that now each LP will correspond to less SOL and more USDC (e.g. 0.9 SOL and 111 USDC).
If you borrowed 1 SOL and 100 USDC to enter into this farming position, and, at redemption, this LP token is redeemed back to 0.9 SOL and 111 USDC, you will end up with a borrow position of 0.1 SOL and a deposit position of 11 USDC.
Currently Apricot does not automatically help you even out the imbalance after redemption. You would need to manually withdraw that added deposit, and swap it to the other token (e.g. SOL) and manually perform repayment.
We are working on a feature to help users even out these imbalances with a few clicks and without the need to withdraw & swap on another dex.
Does farming change my exposure to the underlying tokens? E.g. does farming SOL-USDC LP change my exposure to SOL?
X-farm is delta-neutral by default, meaning it does not change your Apricot account's exposure to the underlying tokens. When you open a farming position for SOL-USDC LP, your exposure to SOL is not altered. If your Apricot account is already longing SOL, it remains so; if it is already shorting SOL, it remains short too.