CoinEx｜What are the contract margins?

Margin is an important term that we have to come into contact with when we understand contracts. There are many terms related to margin. Many people are easily confused when they first come into contact with them. In this article, we will introduce the different meanings of contract margin in detail. .

First of all, we need to know that the margin system is a very important mechanism in contract transactions, and the margin can be regarded as a kind of deposit. In perpetual contracts, according to your open position value and leverage multiple, the market will require you to pay a small amount of funds according to a certain proportion. This part of the funds is what we call margin, which is actually the guarantee funds for your contract position.

initial margin

The first thing you need to understand is the initial margin, which refers to the margin required to open a position. Initial margin = opening value * initial margin rate, initial margin rate = 1/leverage * 100%.

Assuming that the current Bitcoin price is 30,000 USDT, we want to use 10x leverage to make 1 BTC long, then the position quantity is 1 BTC.

Open position value = position quantity * open position transaction price = 1*30000=30000 USDT;

Initial margin rate = 1/leverage*100%=1/10*100%=10%;

Initial margin = opening value * initial margin rate = 30000 * 10% = 3000 USDT.

Therefore, when opening this contract order, we need to prepare a margin of at least 3000USDT in the account in advance as the initial margin.

Freeze Margin

Freezing margin refers to the initial margin and handling fee that need to be frozen when the current order cannot be executed immediately. To put it simply, the limit order we open will need to freeze part of the margin before the transaction is completed. It is calculated as follows:

Forward contract:

Freeze initial margin = position quantity * buy (or sell) limit price * initial margin rate

Freeze fee = contract quantity * buy (or sell) limit price * Maker rate

Reverse contract:

Freeze initial margin = contract quantity * contract face value / buy (or sell) limit price * initial margin rate

Freeze fee = contract quantity * contract face value / buy (or sell) limit price * Maker rate

For example, on the CoinEx exchange, we set a 10x leverage to buy 1 BTC when the bitcoin price is 30,000 USDT. At this time, the bitcoin price is still at 30,001 USDT, so the limit order of 30,000 USDT cannot be executed immediately. Assuming that our VIP level is LV5 at this time, and the contract maker rate is 0.0200%, then:

Freeze initial margin = position quantity * buy limit price * initial margin rate = 1*30000*10%=3000 USDT

Freeze fee = contract quantity * buy limit price * Maker rate = 1*30000*0.0200%=6 USDT

Therefore, before this limit order is filled, we need to freeze the initial margin of 3000 USDT and the handling fee of 6 USDT, for a total of 3006 USDT of frozen margin.

maintenance margin

Maintenance margin refers to the minimum margin level required to maintain the current position, maintenance margin = cumulative open position value * maintenance margin rate, cumulative open position value = ∑ history plus the open position value of reduced positions.

According to the official website of CoinEx, when the position level is between 0-10 BTC, the maintenance margin rate is 0.50%. Based on the above case, maintenance margin = opening value * maintenance margin rate = 30000 * 0.50% = 150 USDT.

Position Margin

Position margin refers to the margin used and locked by the position. In the isolated position mode, when the position margin is less than the maintenance margin, the position will be liquidated, and the user can manually add or reduce the position margin; in the cross-position mode, when the position margin is less than the maintenance margin Margin is automatically allocated to this position from the available balance.

Position margin = initial margin + additional margin - reduced margin + unrealized profit and loss

For example, when the Bitcoin price is 30,000 USDT, and 1 BTC is long with 10x leverage, we have prepared a starting margin of 3,000 USDT, and there is a free margin of 2,000 USDT in the account. At this time, the Bitcoin price drops by 5%, and the mark price reaches 28500USDT, and there is no manual margin addition.

At this time, our unrealized profit and loss = number of positions * (marked price - average opening price) = 1 * (28500-30000) = -1500USDT;

Position margin = initial margin + additional margin - reduced margin + unrealized profit and loss = 3000-1500 = 1500USDT.