Glossary of Derivatives trading terms

Account Margin Equity (Multi-M Derivatives):

What it is: Your account’s margin equity for Multi-M, including unrealised P&L that counts toward margin.
Why it matters: This is a top-level “how healthy is my margin account?” number.
Formula: Account Margin Equity = Collateral Value + Unrealised As Margin
Related: Collateral Value, Margin Equity, Unrealised As Margin

Ask:

What it is: A sell order resting on the order book (the price someone is willing to sell at).
Why it matters: The best ask is the lowest available selling price.
Example: If the best ask for BTC is $50,010 and you place a market buy, you’d be purchasing BTC for this price. (Assuming the sell order has enough volume to cover your buy order.)

Assignment:

What it is: When a position is transferred to a liquidity provider after a liquidation cannot be fully filled in the market.
Why it matters: It describes what happens when the platform needs another mechanism to close risk that the order book didn’t absorb.
See also: Position Assignment System.

Available Margin:

What it is: Margin you can still use to place new orders.
Why it matters: If this approaches zero, new orders may be rejected and liquidation risk increases.
Formula: Available Margin = Margin Equity − Total Initial Margin
Related: Margin Equity, Initial margin, Total Initial Margin

Base: 

What it is: The first currency in a trading pair.
Example: In BTC/USD, BTC is the base currency and USD is the quote currency.
Related: Quote

Backwardation:

What it is: When derivatives prices trade below the spot price (or index) for the same underlying asset.
Why it matters: Often associated with strong near-term demand for the asset relative to future delivery.
Related: Premium

Balance Value:

What it is: The USD value of collateral balances before haircuts are applied.
Why it matters: This is a “raw” valuation; it can be higher than the margin-usable value if haircuts apply.
Related: Collateral Value, Haircut, Wallet Balance Value

Bid:

What it is: A buy order resting on the order book (the price someone is willing to buy at).
Why it matters: The best bid is the highest available buying price.

Example: If the best bid for BTC is $50,010 and you place a market sell, you’d be selling BTC for this price. (Assuming the bid order has enough volume to cover your sell order.)

Cash & Carry:

What it is: A strategy that aims to capture the price difference between spot and derivatives by holding offsetting positions. If a perpetual’s price is rich and funding is positive, a trader might short the perpetual and hold spot long (or another offsetting long exposure). If a fixed maturity contract trades at a large premium, a trader might short the future and hold spot long.

Why it matters: It’s often used to target yield from funding/basis rather than directional price moves.
Related: Premium, Funding rate

Coin-M: 

What it is: A wallet and contract type where positions are supported by one collateral asset (single-collateral).
Note: Coin-M wallets are isolated per asset (not per maturity).
Related: Multi-M, Inverse contract, Trading wallet

Collateral Value (Multi-M Derivatives):

What it is: The USD value of balances that are usable as margin after applying haircuts.
Why it matters: This is closer to “how much margin power do I actually have?” than Balance Value.
Formula: Collateral Value = Balance Value × (1 − Haircut)
Related: Balance Value, Haircut, Margin Equity

Contract:

What it is: A derivatives instrument representing an agreement linked to an underlying asset.
In practice: On Kraken Derivatives, “contract” means a specific tradable market (pair + type), such as a perpetual contract.
Related: Perpetuals, Fixed maturities, Linear, Inverse

Conversion:

What it is: An automatic conversion between non-USD and USD funds for collateral or P&L purposes (when required by system rules).
Why it matters: Conversions can affect displayed balances and may involve fees or haircut effects.
See also: Derivatives Collateral Currencies.

Contango:

What it is: When derivatives prices trade above the spot price (or index) for the same underlying asset.
Why it matters: Often associated with markets pricing in carrying costs or expectations of higher future prices.
Related: Backwardation, Premium

Cross margin:

What it is: A margin mode where all collateral in the wallet supports one or more positions.
Why it matters: Cross margin can reduce liquidation risk for a single position by sharing collateral, but it also means losses in one position can threaten the whole wallet.
Related: Isolated margin, Cross Margin Equity

Cross Margin Equity (Multi-M Derivatives):

What it is: The portion of equity available to support cross-margin positions after accounting for isolated initial margin.
Formula: Cross Margin Equity = Collateral Value + Cross Unrealised As Margin − Isolated Initial Margin
Related: Collateral Value, Isolated Initial Margin, Unrealised As Margin

Effective Leverage:

What it is: A measure of exposure relative to your account’s total value (including unrealised P&L).
Why it matters: It tells you “how levered am I really?” even as P&L changes.
See also: Portfolio Management

Fixed maturities:

What it is: Derivatives contracts that expire/settle on a specific future date.
Why it matters: They don’t rely on funding like perpetuals, but they do have an expiry and settlement process.
Related: Settlement, Perpetuals, Contract

Full Liquidation Fee:

What it is: Charged on full liquidations, calculated as 50% of the minimum maintenance margin of the contract.
Related: Partial Liquidation Fee, Liquidation

Funding rate:

What it is: A user-to-user payment on perpetual contracts designed to keep the contract price near the index price.

If the contract trades above the index, longs pay shorts.

If the contract trades below the index, shorts pay longs.

Why it matters: Funding can meaningfully affect returns for longer holding periods.

For more information see our linear contract specifications and inverse contract specifications.

Good 'Til Cancel:

What it is: An order setting where a limit order stays on the book until it fills or you cancel it.
Why it matters: The default for many traders placing resting limit orders.
Related: Immediate or cancel, Order

Haircut:

What it is: A discount applied to the margin value of a collateral asset (reduces how much it counts as usable collateral).
Example: A 2% haircut on EUR means €100 counts as €98 worth of collateral value (before any FX conversion/display).
Why it matters: Haircuts reduce leverage capacity and affect liquidation buffers.
Related: Collateral Value, Balance Value

Holding wallet:

What it is: A wallet used to keep funds separate from trading risk. Funds here are not used as collateral for positions.
Why it matters: It’s a safety “airlock” between storage and trading. To trade with these funds, you must transfer them into a trading wallet.
Related: Trading wallet

Immediate or cancel:

What it is: An order that executes immediately against available liquidity; any unfilled remainder is cancelled and does not rest on the book.
Edge case: If there’s zero available quantity at the chosen price level, the order is rejected/cancelled immediately.
See also: Order Types.

Impact Mid price:

What it is: A mid-price measure based on the average execution price you’d get by buying and selling a specified notional amount, then taking the middle of those two values.
Why it matters: It’s intended to reflect a more “tradeable” midpoint than simple best-bid/best-ask mid, especially in thinner books.
Note: The notional amount (“x value of contracts”) is contract-specific.
 

Initial margin:

What it is: The amount of collateral required to open (and maintain at opening) a position or place orders that increase exposure.
Why it matters: This is the “deposit” that supports your risk-taking.
Related: Maintenance margin, Total Initial Margin

Inverse contract:

What it is: A contract settled in the base currency of the trading pair.
Example: For BTC/USD, settlement is in BTC (base).
Related: Linear contract, Coin-M

Isolated Initial Margin (Multi-M Derivatives): 

What it is: The initial margin currently allocated to open orders and positions that are in isolated mode.
Why it matters: This portion is kept separate and doesn’t support cross positions.
Related: Isolated margin, Cross Margin Equity

Isolated margin:

What it is: A margin mode where a specific amount of collateral is allocated to a single position.
Why it matters: Losses are limited to the isolated collateral allocated (the rest of the wallet is not directly consumed by that position’s losses).
Related: Cross margin

Linear contract:

What it is: A contract settled in the quote currency of the trading pair.
Example: For BTC/USD, settlement is in USD (quote).
Related: Inverse contract, Multi-M

Liquidation:

What it is: The forced closure/settlement of a position when margin requirements are not met.

How it happens: Contract price moves against you and equity falls below maintenance margin. Or, your portfolio value drops due to losses or collateral value changes.

Related: Maintenance margin, Assignment, Unwind

See here for more information on liquidations.

Liquidation Margin:

What it is: The percentage of the Maintenance Margin Requirement for the Position(s) held in that Margin Account which the Partial Liquidation Process ceases to apply and the Full Liquidation Process is triggered.

How it happens: The default value is 0.7, meaning that if the maintenance margin requirement is $1,000, the liquidation margin threshold is $700.

Related: Liquidation, Maintenance Margin

Maintenance margin:

What it is: The minimum margin required to keep a position open. Falling below this can trigger liquidation processes.
Related: Initial margin, Liquidation

Maker Order:

What it is: A limit order that does not immediately match an existing order and instead rests on the order book, adding liquidity.
Why it matters: Makers typically provide liquidity; fee schedules often treat makers differently than takers. (Lower fees)
Related: Taker Order, Order

Margin Equity: 

What it is: The margin-relevant equity value: usable collateral value plus unrealised P&L counted toward margin.
Why it matters: Many limits and risk checks are based off of margin equity.
Formula: Margin Equity = (Balance Value in USD × (1 − Haircut)) + (Total Unrealised P&L as Margin in USD)
Related: Balance Value, Collateral Value, Unrealised As Margin

Mark price:

What it is: The price used to calculate unrealised P&L and liquidation checks (rather than last traded price).
Note: Calculated as Index Price + a 30-second EMA of the derivatives basis.
Why it matters: Helps reduce liquidation triggers from short-lived extreme price action.
See also: Contract specifications (Multi-M linear / Coin-M inverse)

Mid price:

What it is: The midpoint between best bid and best ask.
Formula: Mid = (Best Bid + Best Ask) / 2
Why it matters: A quick price reference, but can be misleading in thinner order books.
Related: Spread, Impact Mid

Multi-M:

What it is: A wallet and contract type where positions can be supported by multiple collateral types (multi-collateral).
Why it matters: Gives flexibility in collateral management, but introduces haircuts/conversions and portfolio-style risk accounting.
Related: Coin-M, Collateral Value, Haircut

Open Interest:

What it is: The total size of outstanding contracts currently open in the market.
Important nuance: Every open contract has one long and one short, so OI reflects the total open contracts, not a net position.
Example: If OI is 1 BTC (in contract terms), that implies 1 BTC of longs and 1 BTC of shorts are open against each other.
Related: Trade, Open Position(s)

Open Position(s):

What it is: Contracts you currently hold that haven’t been closed, settled, or liquidated.
How to close: Place an order in the opposite direction for the amount you want to reduce/close.
Example: Long 10 contracts can be reduced by selling up to 10 contracts.
See also: Order Types, Reduce only

Order:

What it is: Instructions to buy or sell a derivatives contract (including type, size, price, and time-in-force).
Why it matters: Order type and parameters affect execution quality, fees, and risk.
See also: Order Types

Partial Liquidation Fee

What it is: Charged on partial liquidations, the absolute difference between:

(A) the lesser of the execution price and the Mark Price, in the case of a sell Order, or the greater of the execution price and the Mark Price, in the case of a buy Order; and

(B) the Zero Equity Price, multiplied by the quantity of the Order executed

Related: Liquidation, Full Liquidation Fee

Perpetuals:

What it is: Contracts with no expiry date (they can be held indefinitely).
Key mechanism: Use funding to keep price close to the index.
Related: Funding rate, Fixed maturities

Portfolio Value:

What it is: The total value of the portfolio in USD, including unrealized P&L.
Formula: Portfolio Value = Balance Value + Total Unrealized Profit/Loss
Related: Total Unrealized, Balance Value, Effective Leverage

Premium:

What it is: How far a contract is trading above or below the index price, expressed as a percentage.
Interpretation: Positive premium = contract above index; negative premium = below index.
Related: Contango, Backwardation, Mark price

Quote: 

What it is: The second currency in a trading pair.
Example: In BTC/USD, USD is the quote currency.
Related: Base, Linear contract

Reduce only:

What it is: An order flag that prevents an order from increasing your position size. It can only reduce (or close) an existing position.
Why it matters: Useful for exits and risk controls, especially during volatility.
See also: Order Types

Return on Equity (ROE):

What it is: Profit or loss relative to the initial margin used to open the position.
Formula: ROE = P&L Amount / Initial Margin Amount (often displayed as a %)
Why it matters: A leverage-aware performance metric.
Related: Initial margin, P&L

Settlement:

What it is: The process of closing a contract’s obligations at its settlement time.
Note: Fixed maturity contracts settle at the predetermined expiry date; UI may show “Days til Maturity” as a countdown.
Related: Fixed maturities, Contract

Spread:

What it is: The gap between best ask and best bid (sometimes expressed as a %).
Why it matters: A key measure of liquidity and transaction cost.
Related: Bid, Ask, Mid price

Taker Order:

What it is: An order that immediately matches with resting orders on the opposite side of the order book. (market orders always taker; aggressive limit orders can be taker too)
Why it matters: Takers remove liquidity; fee schedules often differ from maker fees. (Higher fees)
Related: Maker Order

Trade:

What it is: A filled match between a buy and a sell order (fully or partially).
Related: Order, Open Interest

Trading wallet:

What it is: A wallet whose balances are used as collateral for open positions.
Note: Different trading wallets are isolated from each other; Coin-M wallets are isolated from each other and from the Multi-M wallet.
Related: Holding wallet, Multi-M, Coin-M

Total Equity:

What it is: Account-wide margin equity adjusted for unrealized P&L, shown in USD.
Why it matters: Often used as a top-level “account value under margin rules” number.
Related: Account Margin Equity, Margin Equity

Total Initial Margin (Multi-M Derivatives):

What it is: Total initial margin used by all open orders and positions across isolated and cross modes.
Why it matters: Higher total initial margin generally means less available margin.
Related: Available Margin, Initial margin

Total Maintenance Margin (Multi-M Derivatives):

What it is: The total maintenance margin required account-wide to avoid liquidation processes.
Why it matters: Think of it as the minimum buffer line you don’t want to cross.
Related: Maintenance margin, Liquidation

Total Unrealized:

What it is: The combined unrealized P&L from positions plus unrealized funding P&L, shown in USD.
Formula: Total Unrealized = (Unrealized Position P&L + Unrealized Funding P&L) × USD rate
Related: Funding rate, Unrealized As Margin

Unrealized As Margin (Multi-M Derivatives):

What it is: The portion of unrealized P&L (including unrealized funding) that can be used to support margin requirements.
Why it matters: If unrealized gains count as margin, they can increase your available margin; if unrealized losses count, they reduce it.
Related: Margin Equity, Total Unrealised, Conversion, Haircut

Unwind: 

What it is: A process that can occur when a liquidation cannot be assigned; the position’s remaining portfolio value is transferred between counterparties according to the platform’s protection mechanism.
Why it matters: It describes “what happens next” when normal liquidation/assignment pathways don’t complete.
See also:  Equity Protection Process.

Wallet Balance Value:

What it is: Total wallet balances converted to USD using the index price (before any haircut logic, depending on how your UI defines it).
Formula: Wallet Balance Value = Balances × USD rate
Related: Balance Value, Collateral Value