Portfolio Management

This article details the information and features available to assist with effective portfolio management.

## Margin Schedule

The initial margin and maintenance margin required to open a position starts from 2%, which represents a maximum leverage level of 50x. The margin requirements are raised as position size increases and it is important to keep these values in mind when making calculations.

Complete details on initial margin and maintenance margin requirements can be found in our Margin Schedule.

## Estimation of Portfolio Value

Portfolio value is calculated separately for each margin wallet by adding the account balance to the profit or loss from open positions held within the wallet:

Portfolio Value = Balance Value in USD + Profit or Loss from Open Positions

This calculation happens in real-time and you can view this on the Balances panel as the market moves.

We calculate the profit or loss from open positions based on our estimate of the current price of the instrument:

For inverse Futures, profit or loss is calculated as:

Profit or Loss from Open Positions = ( 1 / Entry Price - 1 / Current Price ) * Position Size

For linear Futures, profit or loss is calculated as:

Profit or Loss from Open Positions = ( Current Price - Entry Price ) * Position Size

We continuously update our estimates of current instrument prices based on current spot prices (as given by our real-time indices), and our estimate of the current forward premium or discount:

Mark Price = Index Price + Current Forward Premium or Discount

We calculate the current forward premium or discount as the percentage deviation of the instrument's current mid price from the spot price. The maximum permissible premium or discount is capped at 1% for Futures with 1 day to maturity and 20% for Futures with 210 days to maturity and is linearly interpolated in between (perpetual futures, which do not expire, have a premium cap of 1%).

Note that our estimate of current instrument prices is used only for margin management and does not affect your actual profit or loss once a position is closed out or settled.

## Effective Leverage

### What is Effective Leverage?

Effective leverage is the multiple of the position value compared to the portfolio value of the account, which includes unrealised profit or loss.

This means the leverage amount shown for an open position will change as the price changes because it represents "effective leverage".

### How is Effective Leverage calculated?

Kraken Futures collateral margining has three distinct options:

- Single-Collateral - Cross Margin
- Multi-Collateral - Cross Margin
- Multi-Collateral - Isolated Margin

Cross margin uses the entire balance of the trading wallet as collateral for the position. This is in contrast to isolated margin, where the position is independent and only the collateral used to open the position is at risk.

The effective leverage is calculated by dividing the value of open positions by the total available equity of the account. In other words, the effective leverage is the amount of capital used compared to the amount in the futures trading wallet.

You can calculate the effective leverage for positions with the following formulae:

**Single-Collateral Cross Margin:**

(Position Size * Value of 1 contract) / (Portfolio Value in Base * Mark Price)

**Multi-Collateral Cross Margin:**

Sum of All Position’s Value at Entry / (USD Collateral Value - Isolated Initial Margin + Unrealised Profit/Loss* Isolated & Cross)

**Multi-Collateral Isolated Margin:**

(Position Value at Entry in USD) / (Isolated Margin in USD +/- Isolated Position's Profit or Loss*)

Note that when opening more than one position on different pairs with Multi-Collateral Cross Margin your collateral is shared between those positions and the effective leverage level will be higher for both.

For the “Position Size in USD” portion of the calculation you can add the value of two or more positions together to calculate the net result of effective leverage that multiple positions have on your account.

* For Multi-Collateral contracts, haircut applies to non-USD unrealised Profit and Loss

### Portfolio Value & Collateral Value

Portfolio Value in the above calculations takes into account unrealised Profit/Loss of open positions. Portfolio value also includes unrealised Profit/Loss from the Funding Rate either being credited or debited throughout the hour when trading perpetual contracts. This changes the trading wallet balance which will also change the effective leverage.

The Portfolio Value calculation uses the index price for valuing each asset.

Portfolio Value = Balance Value in USD + Total Unrealised Profit/Loss in USD

Collateral Value refers to the USD value of balances in the account usable as margin. For Multi-Collateral futures, haircuts apply to non-USD collateral.

Collateral Value = (Balance Value in USD * Haircut)

### Understanding why the Effective Leverage changes

When the price moves in your favour and your position is in profit, the effective leverage will be lower as the portfolio now has a higher value due to unrealised profit and thus a lower effective leverage ratio. The opposite is also true, when the price moves against your position the effective leverage will be higher as there is now less collateral available due to unrealised loss.

### Effective Leverage Examples

##### Example of Effective Leverage, Single Collateral Cross Margin

##### Example of Effective Leverage, Multi-Collateral Cross Margin

## Liquidations

Your position(s) may hit a margin threshold such as maintenance margin. In this case, some or all of your open positions may be liquidated.

Liquidations differ per wallet type, for details, see margining articles below:

See also Liquidation FAQ.

## Wallets

**NOTE**: Removing funds from a trading wallet that has open positions will raise the effective leverage level and may lead to liquidation.

Kraken Futures has multiple wallets:

- Multi-Collateral wallet
- The Multi-Collateral wallet is a single omnibus wallet that contains all available collateral currencies for trading MC contracts.

- Single-Collateral wallets*
- There are 5 Single-Collateral Trading wallets; 1 for each collateral asset. These trading wallets are isolated from each other and each collateral asset can only be used for trading SC contracts where they act as the base currency.

- Holding wallet*
- The Holding wallet is used to segregate funds from your trading wallets to ensure that funds inside it are not at risk when trading. Assets held in the Holding wallet are not active as collateral and must be transferred to a Trading wallet in order to open positions.

*Only available on legacy UI

For a guide on transferring funds between wallets, see: Funding your Futures account

**NOTE:**The decimal and thousands separators shown in this article may differ from the formats displayed on our trading platforms. Review our article on how we use points and commas for more information.