By opening a spot position on margin*, you incur corresponding obligations, including the obligation to return the amount of the margin extension to Kraken through position settlement or one or more closing transactions.
How settling a position works
You may close all or part of a spot position on margin by transferring to us, directly from your account balance with no trade involved, funds of the type used by Kraken to make the initial margin extension (e.g., if you took an extension of margin from Kraken denominated in BTC, you must have sufficient BTC in your account to settle the position). This is called position settlement. If your account balance is not sufficient, you may deposit additional funds into your account. If you have sufficient funds in your account, but they are not of the type used by Kraken to make the initial margin extension, you may execute an order for the type and amount of funds you need to settle the position (e.g., buy 1 BTC of BTC/USD). Note: If you have multiple open positions on margin, they will be closed in the order they were created following the "First In, First Out" (FIFO) rule.
How closing transactions work
Through a closing transaction, you may partially or fully close a spot position on margin by executing an opposing order for up to the same volume as the order that opened your position (a sell closes a “long” spot position on margin and a buy closes a “short” spot position on margin). The proceeds from a closing transaction are applied first to the satisfaction of your margin obligation to Kraken. Then, any remaining profit (or loss) is added to (or taken from) your account balances, in an amount denominated in the quote currency of the pair you are trading (e.g., EUR in the pair BTC/EUR).
- Quote Currency of the pair being traded, if it is one of our collateral currencies
- Base Currency of the pair being traded, if it is one of our collateral currencies
- Quote Currency of the pair being traded, if it is not a collateral currency
- Base Currency of the pair being traded, if it is not a collateral currency
If the loss is greater than your balance of collateral currencies, other funds in your account will be taken as needed.
As an example, assume you had a leveraged position on ADA/BTC.
The order of preference for realizing the loss would be:
- BTC, because it is the quote currency of the pair being traded;
- The collateral currencies in the order of preference above; and
- ADA, because it is the base currency of the pair being traded and is not a collateral currency.
If you do not have enough funds in your account denominated in the quote currency of the pair you are trading to cover any remaining loss, funds in your account will be converted, as necessary, into funds denominated in the quote currency of the pair you are trading, subject to a fee (a 1.5% fee for converting between two cash currencies), 2.5% fee for a conversion of BTC or ETH to or from cash, and a 5% fee for all other conversions). As a result, you may want to execute an order for the type and amount of funds you need before entering into a closing transaction so that your closing transaction does not result in a conversion fee.
Note: If you have multiple open positions on margin, they will be closed in the order they were created following the "First In, First Out" (FIFO) rule. Each individual position will follow the logic outlined above for realizing any loss.
How to enter a closing transaction
Just like an order to open a spot position on margin, a closing transaction order needs to use the Advanced order form from the New Order page. As described in more detail below, you must select a level of leverage for the order to instruct the system that you intend to enter into a closing transaction.
Selecting a level of leverage is necessary (e.g., minimum 2x) in order to initiate an order for a closing transaction. However, the level of leverage selected does not need to match the leverage level you used to open the position. This is because, other than indicating to Kraken’s system that the order you are placing is for a closing transaction, the level of leverage selected is irrelevant in a closing transaction.
The closing transaction order must be in the same currency pair as the order that opened the spot position on margin.
To completely close an open spot position on margin, enter the same Amount as the opening order. If you execute a closing transaction order for more volume than your spot position on margin, you will effectively create a new spot position on margin on the opposite side (this is called “flipping” the position).
'Zero volume' feature
To close the full volume of all open positions for a specific pair, you can place '0' as the amount of a closing transaction order. This can be useful to close all open spot positions on margin for a specific pair with one order, to close spot positions for a specific market during periods of volatility when the position size is changing frequently, or to close small remaining volumes of open spot positions on margin.
Suppose you buy 1 BTC of BTC/EUR at 2x leverage (going “long” BTC):
- To close the entire position, you need to sell 1 BTC of BTC/EUR in a closing transaction (at any leverage - the specific level of leverage selected is irrelevant).
- To close half the position, you need to sell 0.5 BTC of BTC/EUR in a closing transaction (at any leverage - the specific level of leverage selected is irrelevant).
- To flip the position by 100%, you need to sell 2 BTC of BTC/EUR in an opposing spot transaction on margin (at any leverage - the leverage amount will apply to the new position and determine the collateral withheld).
- View our examples for settling a position here.