Calculate fees and the required volume
Daily fees equal daily volume × fee rate × ownership share. Annual net fees equal daily fees × 365 − annual cost. Annual net fee ROI is annual net fees ÷ capital × 100. Break-even daily volume equals annual cost ÷ 365 ÷ (fee rate × share). Convert percentages to fractions in the formulas. Positive capital is required for ROI, and a positive fee rate and share are needed for finite break-even volume.
Work through the annual fee budget
In a hypothetical scenario, daily volume is $1,000,000, the fee is 0.30%, and share is 1%. Daily fees are $30 and annual gross fees are $10,950. Subtracting $3,650 of annual costs leaves $7,300. With $100,000 of capital, net fee ROI is 7.30%. Daily volume of approximately $333,333.33 would cover those annual costs under the same unchanged fee rate and ownership assumptions.
Match fee eligibility to the input share
The formula assumes the entered fee is available to the modeled LP share. Adjust assumptions when part of the swap fee goes elsewhere. A concentrated-liquidity position may have a changing active share and receive no trading fees while outside its range. Costs should use the same currency as volume and capital. Zero fees or zero share cannot cover a positive cost through this revenue model, regardless of the volume entered.