Margin and Margin Rates Overview

Maintenance Margin

Maintenance Margin is the minimum margin required to maintain a position. When the position's margin reaches the maintenance margin due to funding, forced closure occurs even if the position is profiting. (Varies by contract) When the position's margin reaches the maintenance margin because of the negative UPNL, the position is liquidated. MCS sets a default maintenance margin rate of 0.35% for BTC/USDT perpetual contracts and changes depending on the risk limit. The maintenance margin rate can be found in the Contract Details tab.

 

<Maintenance Margin Example>

David buys 10,000 BTC/USDT contracts at 50x leverage when the price is 5,000 USDT. The position's maintenance margin is as follows.

\begin{align} \scriptsize\textsf{Maintenance Margin}&\scriptsize={\textsf{Quantity}\over\textsf{Order Price격}}\times\textsf{Maintenance Margin Rate}\\ \tiny\\&\scriptsize= {\textsf{5,000}\over\textsf{2,000}}\times\textsf{0.0035} = \textsf{0.00875 BTC}\end{align}

 

 

Initial Margin

Initial Margin is the margin needed for a trader to open a position. Traders can calculate the initial margin by multiplying the initial margin rate by the position value. The default initial margin rate is 1% and changes depending on the leverage and risk limit used. Traders can see their maximum leverage available through the table below.

 

 

<Initial Margin Example>

When David uses 50x leverage to open a position worth 50BTC, he only needs to use 1BTC, which the 1 BTC used is the initial margin.

 

Initial Margin for Closing Orders

At times, the required Initial Margin may not exist. The details are as follows.

 

When a trader holds any Long and Short position or active order, if an order in the opposite direction is submitted, there is no required initial margin unless there are access order quantities or margin compared to the existing position and order. This is because the order that is being submitted is considered as a closing order.

 

Furthermore, when submitting an order in the opposite direction to the current position, if the order quantity is smaller than the position size, there is no required initial margin.

 

$$ \small \textsf{Buy(Long) Position Required Initial Margin} = {\textsf{Contract Quantity}\over{\textsf{MIN(Buy Limit Order Price, Market Price)}\times\textsf{Leverage}}} $$

Order will reserve a two-way (fee to open + fee to close) taker fee of 0.075%. Actual trading fees will be calculated based on the nature of the order and the execution price.

 

$$ \small \textsf{Sell (Short) Position Required Initial Margin} = {\textsf{Contract Quantity}\over{\textsf{Order Price}\times\textsf{Leverage}}} $$

Order will reserve a two-way (fee to open + fee to close) taker fee of 0.075%. Actual trading fees will be calculated based on the nature of the order and the execution price.

 

When an Active Order exists, the system will take the max[Buy(Long) Initial Margin, Sell(Short) Initial Margin] as the active order initial margin.

<Initial Margin for Closing Order Example>

The current Active Order Initial Margin constitutes of Buy(Long) Initial Margin = 10 BTC, Sell(Short) Initial Margin = 15 BTC. Then the current Initial Margin for Active Orders is 15 BTC.

If an additional 7 BTC was used for Buy(Long) Active Orders, then the total required initial margin is max(10+7, 15) = 17. Therefore, an additional 2 BTC is required to submit the 7 BTC worth of order.

 

 

Risk Limit

The risk limit is a system that prevents high-leverage contracts from being liquidated at once. Applying the risk limit means that the higher the value of the position, the higher the initial margin required, and the lower the maximum leverage available. In addition, each position has a risk limit level and a maintenance margin rate according to the level. If the position margin does not meet the maintenance margin rate of the risk limit level, partial liquidation occurs until the criteria meet the level below the current risk limit level. This allows traders to avoid liquidation of their entire position at once. Traders are free to modify their level within the risk limits.

 

Risk Limit Calculation Equation

$$\small\textsf{Risk Limit Level}=max\left(0,1+interger\left(\frac{Position\:Value-Base Value}{Step Value}\right)\right)$$

\begin{align}&\scriptsize \textsf{Base Value} : \textsf{BTC limit for the lowest risk limit (ex.} > \textsf{100 BTC)}\\&\scriptsize \textsf{Step Value} : \textsf{BTC interval between each risk limit level (ex.} > \textsf{100 BTC)}\\&\scriptsize \textsf{Risk Limit Level} : \textsf{Starts from 0}\end{align}

 

*Risk Limit

The Position Value of the Risk Limit is the summation of all position values of current open positions.

$$ \small\textsf{Position Value} = {\textsf{Quantity}\over\textsf{Mark Price}} $$

※Note: The system calculates the sum of long/short position values.

 

<Risk Limit Adjustment Example>

Traders can freely adjust their risk limits. However, in the case of insufficient margin when increasing the risk limit (lowering leverage), the risk limit can only be adjusted after the position is closed. We will set an example of adjusting the risk limit after closing the position below.

David currently holds a position worth 150 BTC with 100x leverage. He decides to add 60 BTC to the position resulting in a sum of 210 BTC worth positions. To do so, David closes his current position worth 150 BTC and adjusts his risk limit according to the risk limit table. Once the risk limit has changed, David can only submit orders up to 66x leverage, 1.0% initial margin and 0.5% maintenance margin. Now he can submit his order worth 210 BTC.

 

 

Isolated Margin

Traders will allocate their margin on an order-by-order basis. If a trader is liquidated, only the margin allocated will be affected and the remaining wallet balance rests unaffected.

 

Isolated Margin Liquidation Price Equation

Isolated Margin Liquidation Price (Long)

$$ \textsf{Isolated Margin Liquidation Price (Long)} ={{\textsf{Avg. Entry Price} \times \textsf{Leverage}} \over \textsf{Leverage(1 - Maintenance Margin Rate) + 1}} $$

 

<Isolated Margin Liquidation Price (Long) Example> 

David goes long 10x @2000 USDT

$$ \small\textsf{Isolated Margin Liquidation Price (Long)} ={{\textsf{2000} \times \textsf{10}} \over \textsf{10(1 - 0.005) + 1}} ≈ \textsf{1,826.48 USDT} $$

 

Isolated Margin Liquidation Price (Short)

$$ \small\textsf{Isolated Margin Liquidation Price (Short)} ={{\textsf{Avg. Entry Price} \times \textsf{Leverage}} \over \textsf{Leverage(1 + Maintenance Margin Rate) - 1}} $$

 

<Isolated Margin Liquidation Price (Short) Example> 

David goes short 10x @2000 USDT

$$ \small\textsf{Isolated Margin Liquidation Price (Short)} ={{\textsf{2000} \times \textsf{10}} \over \textsf{10(1 + 0.005) - 1}} ≈ \textsf{2,209.94 USDT}$$

 

 

Cross Margin

Cross margin is a way of trading with the entire available Wallet Balance. The maximum contract size of the cross margin is determined by the maximum leverage allowed for a trading pair. Leverage depends on the initial margin of the position. In other words, the larger the initial margin, the lower the leverage used by the traders. In addition, the position is closed when the position margin reaches the maintenance margin level. In cross margin, the system automatically determines the trader's leverage according to the amount of contracts submitted.

 

<Cross Margin Example>

Assuming David has 50BTC in his wallet, the leverage automatically changes to 10x when he buys contracts worth 5BTC and 5x when he buys contracts worth 10BTC with cross margin.

 

Cross Margin Liquidation Price Equation

Cross Margin Liquidation Price (Long)

$$ \small\textsf{Cross Margin Liquidation Price (Long)}$$

$$ \small = {{\textsf{Avg. Entry Price} \times \textsf{Quantity}} \over {\textsf{Quantity(1 - Maintenance Margin Rate + Initial Margin Rate} - {\textsf{Avg. Entry Price} \times \textsf{Taker Fee Rate} \over \textsf{*Bankruptcy Price}}) + {\textsf{Available Balance}\times\textsf{Avg. Entry Price}}}} $$ 

\begin{align}\scriptsize\textsf{*Cross Margin Bankruptcy Price (Long)} = {\textsf{1.00075}\times\textsf{Quantity}\over{{\textsf{Quantity}\over\textsf{Avg. Entry Price}}+ \textsf{Available Balance}}}\qquad \scriptsize\textsf{**Available Balance}=\textsf{Wallet Balance}-\textsf{Other Position Margin}-\textsf{Order Margin}\end{align} 

 

Cross Margin Liquidation Price (Short)

$$ \textsf{Cross Margin Liquidation Price (Short)}$$

$$ \small = {{\textsf{Avg. Entry Price} \times \textsf{Quantity}} \over {\textsf{Quantity(1 + Maintenance Margin Rate - Initial Margin Rate} + {\textsf{Avg. Entry Price} \times \textsf{Taker Fee Rate} \over \textsf{Bankruptcy Price}}) - {\textsf{Available Balance}\times\textsf{Avg. Entry Price}}}} $$

\begin{align}\scriptsize\textsf{*Cross Margin Bankruptcy Price (Short)} = {\textsf{0.99925}\times\textsf{Quantity}\over{{\textsf{Quantity}\over\textsf{Avg. Entry Price}}- \textsf{Available Balance}}}\qquad \scriptsize\textsf{**Available Balance}=\textsf{Wallet Balance}-\textsf{Other Position Margin}-\textsf{Order Margin}\end{align}

 

 

Order Margin

Order Margin is the minimum required margin to maintain an open order. Traders can check your order margin by adding the initial margin and taker closing fees for all active orders submitted by the trader.

 

Order Margin Equation

\begin{align}&\small \textsf{Order Margin} = \textsf{Initial Margin* + Fee to Close**}\\\scriptsize\\&\scriptsize\textsf{*Initial Margin} = {({\textsf{Quantity} \times \textsf{Multiplier}}) \over ({\textsf{Avg. Entry Price} \times \textsf{Leverage}})}\\&\scriptsize \textsf{**Fee to Close} = {{\textsf{Quantity} \times \textsf{Multiplier}} \over \textsf{Bankruptcy Price calculated with Order Price}} \times \textsf{Taker Fee Rate}\end{align}

 

 

Position Margin

Position margin represents the current real time position margin. Thus in addition to the margin used to open the position, unrealized profit and loss (UPNL) or unrealized profits is included. The calculation of position margin differs slightly between isolated margin and cross margin.

 

Position Margin Equation

Isolated Margin

$$ \small\textsf{Position Margin (Isolated)} = \textsf{Initial Margin*} + \textsf{Fee to Close**} + \textsf{UPNL} $$

 

Cross Margin

$$ \small\textsf{Position Margin (Cross)} = \textsf{Initial Margin*} + \textsf{Fee to Close**} + \textsf{Unrealized Profit} $$

\begin{align}&\small\textsf{*Initial Margin} &&\small= {{\textsf{Quantity} \times \textsf{Multiplier}} \over {\textsf{Avg. Entry Price} \times \textsf{Leverage}}}\\\tiny\\&\small\textsf{**Taker fee to close} &&\small= {{\textsf{Quantity} \times \textsf{Multiplier}} \over \textsf{Bankruptcy Price calculated with Order Price}} \times \textsf{Taker Fee Rate}\end{align}