Maintenance Margin

Maintenance Margin is essential for sustaining a position in trading. This article will delve into the calculation process specifically for USDT Perpetual contracts.

 

 

What is the Maintenance Margin?

Maintenance Margin is the minimum amount of margin a trader must maintain in their position or account to continue holding a position. When unrealized losses cause the position margin in a position or account to fall below the required maintenance margin level, liquidation will be triggered.

 

As traders hold larger contract values (position value + order value), the maintenance margin required will also increase by a fixed percentage as the contract value rises to a specific level. Each trading pair has its maintenance margin base rate, which adjusts according to changes in the risk limit tiers.

 

For example, when you open a BTCUSDT position with a position value of 4000 Cont or below, the maintenance margin rate (MMR) required for the position is 0.005% of the position value. If the position value increases to 8,000 Cont, the MMR required will also increase to 0.01% of the position value.

 

 

Calculation of Maintenance Margin Rate (MMR)

The Maintenance Margin Rate (MMR) for each position is determined using a tier-based calculation according to the margin level of the position value. Any excess beyond a particular tier is subject to the calculation based on the MMR of the new tier.

 

BTCUSDT

 

Tier	Risk Limit (Cont)	Maintenance Margin Rate Required	Maximum Leverage
1	4,000	0.005	100
2	8,000	0.01	50
3	15,000	0.02	25
4	300,000	0.025	20
5	750,000	0.05	10
6	1,400,000	0.1	5
7	2,800,000	0.125	4
8	10,000,000	0.25	2

 

 

ETHUSDT

 

Tier	Risk Limit (Cont)	Maintenance Margin Rate Required	Maximum Leverage
1	20,000	0.005	100
2	50,000	0.01	50
3	200,000	0.02	25
4	1,500,000	0.05	10
5	2,000,000	0.1	5
6	2,500,000	0.125	4
7	3,000,000	0.25	2

 

Assumption: A trader buys 100 contracts with 10x leverage, and the mark price of each contract is 35 USDT. The details are as follows:

Position value = Entry price of the position × Number of contracts = 100 × 35 = 3500 USDT

Initial margin = Position value / Leverage = 3500 / 10 = 350 USDT

Maintenance margin = Position value × Maintenance margin rate = 3500 × 0.005 = 17.5 USDT

Before triggering liquidation, the maximum unrealized loss the position can withstand (calculated using the mark price) is 332.5 USDT (350 USDT - 17.5 USDT).

Note: This estimation is based on an ideal scenario without consumption (fees), and in actual trading, wear (payment of fees) may occur.

 

 

Conclusion

Understanding the calculation process for both position and order maintenance margins is essential for traders to manage their risk effectively on Coin8. By comprehending how these margins are calculated, traders can make informed decisions to reduce liquidation risk and optimize their trading strategies.