In derivatives trading, the Initial Margin (IM) is the minimum margin required to open a position. The leverage selected by traders directly affects the Initial Margin required. The higher the leverage used, the lower the Initial Margin required to open the position.
For Inverse Perpetual and Inverse Expiry contracts, margin is calculated and settled in the base coin / underlying cryptocurrency (for example BTC in BTCUSD contracts).
Formula:
Initial Margin = Position Value / Leverage
Position Value = Position size / Mark Price
Example:
Assume Trader A opens a 12,000 BTCUSD at mark price 80,000 USD with 50× leverage
Initial Margin Calculation:
= Contract Quantity / (Order Price × Leverage)
= 12,000 / (80,000 × 50)
= 12,000 / 4,000,000
= 0.003 BTC
This means the trader only needs 0.003 BTC (before considering fees) to open a position worth 0.15 BTC (Position Value = Position size / Mark Price= 12,000 / 80,000)
Please note that the initial margin shown in the position tab includes the taker fee, which may be incurred in closing the position.
The estimated closing position fee is calculated slightly differently, depending on the direction of the position — long or short.
Long Positions Formula:
Estimated Fee to Close Position = Position Size / Position Average Entry Price × (1 − 1 / Leverage) × Taker Fee Rate
Revisiting Trader A’s case: Trader A places a 12,000 contract at a price of $80,000 with 50x leverage.
According to the calculation of the above example:
Estimated Fee to close position = 12000 / 80,000 × (1 − 1 / 50 ) × 0.055% = 0.00008085 BTC
In this case, the initial margin for the position is 0.003 + 0.00008085 = 0.00308085 USDT.
Short positions Formula:
Estimated Fee to Close Position = Position Size / Position Average Entry Price × (1 + 1 / Leverage ) × Taker Fee Rate
Revisiting Trader A’s case: Trader A places a 12,000 contract at a price of $80,000 with 50x leverage.
According to the calculation of the above example:
Estimated Fee to Close Position = 12,000 / 80,000 × (1 + 1 / 50 ) × 0.055% = 0.00008415 BTC
In this case, the initial margin for the position is 0.003 + 0.00008415 = 0.00308415 USDT.
Important Note:
－ Since the Initial Margin calculation involves Mark Price, and Mark Price updates in real time, your Initial Margin requirement will also fluctuate accordingly.
－ Using higher leverage reduces Initial Margin but it will increase liquidation risk on the other hand.
－ The actual maximum leverage available depends on the Risk Limit Tier.