What is your approach to margining?
For each margin account, we calculate your portfolio value by adding the margin account balance to the profit or loss of open positions. We then calculate the margin requirement for open positions and open orders. If the portfolio value is greater than the margin requirement, the account is fully collateralised.
What happens if the portfolio value of one of my margin accounts falls below my margin requirement?
You may hit a margin threshold such as maintenance margin. In this case, some or all of your open positions may be liquidated. Positions in any other margin account will not be affected.
The margining system is described in more detail here.
What if I have a short and long position in different maturities?
It is important to note that when trading both a long and a short position of the same instrument (e.g. short the BTC perpetual, long the BTC quarterly) that your margin account can be liquidated due to the variance in the premiums of each contract. The maximum premium/discount from the index price for perpetual futures contracts is 1% and the maximum premium/discount from the index price for fixed maturities is 20% at 210 days-to-maturity and 1% with 1 day to maturity and linearly interpolated in between.
For example, the Bitcoin Real Time Index (BRTI) is currently 35,000 and a trader has a short position in the perpetual contract and a long position in the fixed maturity. In the fixed contract, there are ~87 days left to maturity, meaning that the mark price in the fixed market can drift as far away as ~8.82% from the index price (down to 31,913 or up to 38,087).
If the price on the fixed contract dropped enough to bring the portfolio value below maintenance margin (even if the perpetual position were in profit), then all of the positions in that margin account would be liquidated. When managing risk on spread positions, it is important to account for these premium variations.
What are the Initial Margin requirements?This depends on the cryptocurrency being traded and the size of the position. We have more details on our Margin Schedule.
There is margin netting between long and short positions in the same margin account (i.e. the same instrument type) but there is no margin netting across positions in different margin accounts.
For instance, there is margin netting between a long Bitcoin-Dollar Futures position in one maturity and a short Bitcoin-Dollar Futures position in another maturity. The Total Margin Requirement will then be calculated as:
Total Margin Requirement = Max(Margin Long Positions, Margin Short Positions)
This means that the margin requirement of only long or short positions is counted, whichever is greater. This applies to all margin parameters (i.e. Initial Margin and Maintenance Margin).
Why is this useful?
Margin netting allows to efficiently exploit price differences across maturities. For instance, if you think that the price of Futures A is too high compared to Futures B, you could put on a short position in A and a long position in B. This will turn a profit if the difference decreases. Margin netting ensures that margin requirements for this position are not excessive.