Altcoins Talks - Cryptocurrency Forum
Crypto Discussion Forum => Cryptocurrency discussions => Topic started by: CoinEx on April 19, 2022, 10:02:29 AM
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When trading futures, it is vital to know how the Margin Rate (Ratio) is calculated because it will determine whether your position will be forced-liquidated. That said, the Margin Rate (Ratio) is calculated differently across trading platforms. For instance, forced liquidation will be triggered when the Margin Rate (Ratio) falls below a certain level on some platforms, while the risk of forced liquidation increases as the Margin Rate (Ratio) goes up on other platforms. Today, let’s dive into how the Margin Rate (Ratio) is determined on different platforms.
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1. CoinEx
There are two types of Margin on CoinEx: Isolated Margin and Cross Margin.
When Isolated Margin is selected, Margin Rate = (Position Margin) / Open Value;
When Cross Margin is selected, Margin Rate = (Available Margin + Position Margin) / Open Value.
In particular, Position Margin = Initial Margin + Increased Margin — Decreased Margin + Unrealized PNL.
Suppose a CoinEx user starts a long position of 1 BTC with 10X leverage when the BTC price is at 30,000 USDT and adds an Initial Margin of 3,000 USDT. If the BTC price drops by 5% (the Mark Price falls to 28,500 USDT) and the total Margin for his position is fixed at 3,000 USDT, the Margin Rate of the user’s position will be calculated as follows (excluding the transaction fee):
Margin Rate = (Available Margin + Initial Margin + Increased Margin — Decreased Margin + Unrealized PNL) / Open Value = (3,000–1,500)/30,000 = 5%.
On CoinEx, a position will be forced-liquidated when the Margin Rate falls below the Maintenance Margin Rate. In other words, the lower the Margin Rate, the higher the risks of forced liquidation.
2. Binance
Here is how the Margin Ratio is calculated on Binance: Margin Ratio = Maintenance Margin / Margin Balance. The Maintenance Margin is the minimum Margin Balance required for maintaining a position, while the Margin Balance equals the Wallet Balance plus Unrealized PNL.
Suppose a Binance user starts a long position of 1 BTC with 10X leverage when the BTC price is at 30,000 USDT and adds an Initial Margin of 3,000 USDT. In addition, on Binance, the Maintenance Margin Rate corresponding to Level 1 (1 BTC) is 0.4%. If the BTC price drops by 5% (the Mark Price falls to 28,500 USDT) and the total Margin for his position is fixed at 3,000 USDT, the Margin Ratio of the user’s position will be calculated as follows:
Maintenance Margin = Open Value * Maintenance Margin Ratio = 30,000*0.4% = 120 USDT;
Margin Ratio = Maintenance Margin / Margin Balance = 120/(3,000–1,500) = 8%
On Binance, a position will be forced-liquidated when the Margin Ratio reaches 100%, which means that the risk of forced liquidation increases as the Margin Ratio goes up.
3. Huobi
On Huobi, the Margin Rate is called the Margin Ratio, which is determined as follows:
Isolated Margin Ratio = (Account Equity / Used Margin) * 100% — Adjustment Factor.
Cross Margin Ratio = Account Equity / ∑ (Used Margin * Adjustment Factor) of all futures contracts in the cross account — 100%;
Account Equity = Account Balance + Current-period Realized PnL + Current-period Unrealized PnL;
In particular, Used Margin = Position Margin + Frozen Margin; Position Margin = Contract Face Value * Position Quantity * Latest Price / Leverage.
Suppose a Huobi user starts a long position of 1 BTC with 10X leverage when the BTC price is at 30,000 USDT, the Contract Face Value stands at 0.001 BTC (i.e. the Net Position equals 1,000), and the Adjustment Factor is 7.5%. In addition, the Margin is set at 3,000 USDT. If the BTC price drops by 5% (the Mark Price falls to 28,500 USDT) and the total Margin for his position is fixed at 3,000 USDT, the Margin Ratio of the user’s position will be calculated as follows:
Position Margin = Contract Face Value * Position Quantity * Latest Price / Leverage = 0.001*1,000*30,000/10 = 3,000 USDT
Account Equity = Account Balance + Current-period Realized PnL + Current-period Unrealized PnL = 3,000–1,500 = 1,500 USDT
Margin Ratio = (Account Equity / Used Margin) * 100% — Adjustment Factor = (1,500/3,000)*100% — 7.5% = 42.5%
On Huobi, a position will be forced-liquidated when the Margin Ratio ≤0%. In other words, the lower the Margin Ratio, the more likely the position will be forced-liquidated.
Given that there are many ways to calculate the Margin Rate (Ratio), users should be careful with the ways through which the rate is determined when trading futures on different platforms. By comparison, Huobi’s Margin Ratio is the most complicated, while CoinEx features a much simpler calculation process.