2024-03-14 14:09:28Position margin under isolated margin mode
In isolated margin mode, it depicts the margin placed into a position is isolated from the trader's account balance. In the event of liquidation, the trader will only lose all of his position margin (excluding funding fees). Hence, the position margin under isolated margin mode is:
Position margin (isolated margin mode) = initial margin + fee to close.
Replenishment of position margin under isolated margin mode
When a trader pays funding fee for a position, the funding fee will be deducted from the available balance at every funding timing (0000 UTC, 0800 UTC and 1600 UTC). In the event where a trader has insufficient available balance, the funding fee will then be deducted from position margin and this will result in the position's liquidation price to move closer to the mark price and increase the risk of liquidation.
To avoid this from happening, traders can make deposits, perform asset exchange increases or release order margin from cancelling active orders to replenish their position margin or increase the available balance. However, do note that, under different contracts and different scenarios, the process of replenishment to position margin will be different too. Below show how the above stated will affect trader's position margin.
1. Inverse contract
Scenario A: When position margin has been decrease due to funding fee deduction but is still greater than zero
All above mentioned asset increase will be added to available balance and will NOT be used for auto replenishment of position margin
Scenario B: Position margin is lesser than zero due to funding fee deductions and position is still having unrealized profit
All above-mentioned asset increases will be used to replenish the position margin until the position margin is fully replenished to 100% of initial margin + fee to close. Any remaining will be added to the available balance.
Example
Assuming trader A has a BTCUSD position, the initial position margin is 1 BTC. After some time, the position margin has become -0.05 BTC due to funding fee deductions as the available balance is zero. Now, trader A makes a deposit of 1.1 BTC.
As a result, current position margin will be restored back to full 1 BTC (of the initial position margin and the remaining 0.05 BTC (1.1 - 0.05 - 1 ) will be added to available balance.
2. USDT contract
Regardless of whether the position is greater or lesser than zero due to funding fee deduction, any asset increase will be used to replenish the position margin until the position margin is fully replenished to 100% of initial margin + fee to close. Any remaining will be added to the available balance.
Position margin under cross margin mode
When a trader is using cross margin mode, it uses all of a trader’s available balance within the corresponding trading pair coin type to prevent liquidation, hence the display of the position margin will be different from isolated margin as it will now occupy the available balance to cover the unrealized loss. Below shows the details on how position margin is occupied under cross margin mode.
1. One way position mode
Position margin under cross margin with unrealized profit
= Initial margin + fee to close
Position margin under cross margin with unrealized loss
= Initial margin + fee to close - unrealized loss
Example 1: Position with unrealized loss
Trader place a long entry of 750 MNT at 2.753 USDT with 50x leverage cross margin mode. The current available balance is 55.6388 USDT, initial margin = 41.2950 USDT, fee to close = 1.5175 USDT. Hence, the position margin right after the position is opened is 41.2950 + 1.5175 ≈ 42.81 USDT.
Now, the unrealized P&L (mark price) is -7.5 USDT of unrealized loss. The position margin will now become 42.81 - (- 7.5) ≈ 50.31 USDT and the available balance =55.6388 - 7.5 = 48.1388 USDT.
From the above scenario, we can see that 7.5 USDT has been deducted from available balance and added to position margin to cover the unrealized loss (mark price).
Example 2: Position with unrealized profit
Trader place a long entry of 750 MNT at 2.757 USDT with 50x leverage cross margin mode. The current available balance is 31.3102 USDT, position margin = 42.93 USDT
Now, the unrealized P&L (mark price) is in 2.25 USDT of unrealized profit. The position margin will still remain as 42.93 USDT, while available balance remain as 31.3102 USDT.
No changes to the position margin or available balance, as the unrealized profit cannot be used as available balance. It will only be realized after the position is closed.
2. Fully hedged position
For a fully hedged position under cross margin mode, the quantity for long and short position must be the same. Fully hedged positions will not be liquidated as the unrealized profit of one position will be used to support the unrealized loss of the opposite direction of position under the same trading pair.
Position margin (Long position) = 1.2 * Maintenance margin % * Position Value + fee to close - net unrealized loss
Position margin (Short position) = 1.2 * Maintenance margin % * Position Value + fee to close
Initially, trader A place a long entry of 750 MNT at 2.762 USDT with 50x leverage cross margin mode under the lowest risk limit tier. The current available balance is 121.3345 USDT, maintenance margin rate = 1%.
Initial margin = 41.4298 USDT, fee to close = 1.5225 USDT. Hence, the position margin right after the position is opened is 41.4298 + 1.5225 ≈ 42. 95 USDT.
Now, the mark price decreases to 2.757 USDT, unrealized loss (mark price) = -3.75 USDT
Position margin = 42.95 + 3.75 = 46.7 USDT
Available balance = 121.3345 - 3.75 = 117.5845 USDT
Now, the mark price dropped further to 2.756 USDT, and trader A decided to lock in the loss (mark price) of 4.5 USDT, and opened a short entry of 2.756 USDT, with the same quantity of 750 MNT.
The position margin of long and short position will now become:
Long position = (1.2 * 1% * 2071.5) + 1.5536 -(-4.5) ≈ 30.88 USDT
Short position = (1.2 * 1% * 2067) + 1.5813 ≈ 26.38 USDT
Regardless how the price movement is, the position margin will remain the same as the 4.5 USDT loss from the long position has been locked in. Any further unrealized loss or profit of either position will be used to support the other position. Available balance will not be affected and remain the same as 105.4710 USDT.
3. Partially hedged position
Position margin for position with lesser quantity
= 1.2 * Maintenance margin % * Position Value + fee to close
Position margin for position with more quantity
= 1.2 * Maintenance margin % * Position Value for fully hedged proportion + fee to close + initial margin of unhedged proportion + net unrealized loss of fully hedged proportion + unrealized loss of unhedged position
Example 1:
Trader A has 1000 MNT of MNTUSDT long position at 2.817 USDT and 1200 MNT of MNTUSDT short position at 2.814 USDT, cross margin mode 50x leverage.
Net unrealized P&L of fully hedged proportion (1000 MNT) = -8+ (6/1200*1000)= -3 USDT (loss)
Unrealized P&L of unhedged proportion (200 MNT)= 6 / 1200 * 200 = 1 USDT (profit)
Position margin for:
Long position (less quantity)
= 1.2 * Maintenance margin % * Position Value + fee to close
= 1.2 * 1 % * 2817 + 2.0704
≈ 35.87 USDT
Short position (more quantity)
= 1.2 * Maintenance margin % * Position Value for fully hedged proportion + fee to close + initial margin of unhedged proportion - net unrealized loss of fully hedged proportion - unrealized loss of unhedged position
= 1.2 * 1 % * (3376.8/1200*1000) + 2.5831 + (67.536/1200*200) - (-3) + 0
≈ 50.60 USDT
Example 2:
Trader B has 1000 MNT of MNTUSDT long position at 2.817 USDT and 500 MNT of MNTUSDT short position at 2.809 USDT, cross margin mode 50x leverage.
Net unrealized P&L of fully hedged proportion (500 MNT) = (-10/1000*500) +1 = -4 USDT (loss)
Unrealized P&L of unhedged proportion (500 MNT) = -10 / 1000 * 500 = -5 USDT (loss)
Position margin for:
Long position (more quantity)
= 1.2 * Maintenance margin % * Position Value for fully hedged proportion + fee to close + initial margin of unhedged proportion - net unrealized loss of fully hedged position - unrealized loss of unhedged position
= 1.2 * 1 % * (2817/1000*500) + 2.0704 + (56.34/1000*500) - (-4) - (-5)
≈ 56.14 USDT
Short position (less quantity)
= 1.2 * Maintenance margin % * Position Value + fee to close
= 1.2 * 1 % * 1404.5 + 1.0744
≈ 17.92 USDT
When the unrealized loss increases, the position margin of the more quantity position will increase and the available balance will be decreased. Take the below screenshot as an example:
The unrealized loss (mark price) has now increased to -12 USDT. The available balance will decrease (-12/1000*500) = -1 USDT and it will be added to the position margin (long) to cover the loss.
Available balance changed from 68.6586 USDT to 67.6586 USDT.
Position margin changed from 56.14 USDT to 57.14 USDT.
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