USDT Perpetual Contract Introduction

Margin

USDT standard perpetual contract in all varieties of contracts use the denominated currency USDT as collateral assets, the user only needs to hold USDT to participate in the transaction of each variety contract; currency-based perpetual contracts are secured assets in the underlying currency, and the user needs to hold the corresponding currency to participate in the transaction of the symbol contract, such as the BTC/USD currency standard perpetual contract, and the user needs to transfer to BTC as a secured asset.

Because of the different currencies in which the guaranteed assets are used, the risk of depreciation of the guaranteed assets in both contracts varies when prices fall. Suppose that when the price of the BTC/USD currency is perpetual, the higher the requirement for the secured asset required for the user's position, the more BTC is required to hold the secured asset, but the USDT standard perpetual contract does not affect the value of the USDT secured asset because the required secured asset is USDT.

Valuation Unit

A USDT standard perpetual contract is denominated in USDT and a currency standard perpetual contract is denominated in US dollars. "Thus the index prices between the two will also vary, e.g. the BTC/USDT index price is the price taken from the BTC spot to USDT on each exchange, and the BTC/USD currency standard perpetual contract is the price taken from the BTC spot USD on each exchange."

The face value of the contract

The value of each contract for USDT standard per contract is the corresponding underlying currency, e.g. BTC/USDT has a face value of 0.001BTC, and the value of each contract is USD, e.g. BTC/USD is $100.

Profit and loss currency

All type of contracts of the USDT standard perpetual contract use the denominated currency USDT to calculate profit or loss, and the currency standard perpetual contract calculates the profit or loss in the underlying currency, e.g. the user trades the BTC/USD currency standard perpetual contract in the currency BTC.

Leverage and position limit

Risk limits are a risk management mechanism used to limit a trader's position risk. In a volatile trading environment, a single trader holding a large position with high leverage can result in significant losses. The system uses the concept of dynamic leverage, i.e. the maximum leverage available for trading will vary depending on the value of the position held by the trader: the greater the value of the position held, the lower the maximum leverage available. At the same time, the larger the leverage selected, the smaller the open position.

Maintenance margin rate

The margin rate is a measure of the risk of position-guaranteed assets, the maintenance margin is the minimum margin rate of a position, when the position margin rate reaches the maintenance margin rate, your position will be forced to be taken over by the system. We use the marked price to calculate margin rates to avoid forced closing due to non-liquidity or market manipulation.

Ladder maintenance margin rates

In order to prevent large positions from bursting from the impact on market liquidity, resulting in large losses, we use a ladder mechanism to reduce positions. Each ladder corresponds to a different maintenance margin rate, when the system determines that the margin is not enough for the current position of the position of the maintenance margin, it will carry out the operation of reducing the number of positions to the next position in the ladder.

Opening margin

The opening margin includes the initial margin and the opening loss.

Opening losses occur when the futures contract price moves unfavourably (that is, the mark price is lower than the order price of the long order). Incorporating opening losses into the cost of opening a position can help prevent forced liquidation when traders place orders. If the opening loss is not included in the cost of opening a position, users’ positions are likely to be liquidated immediately when they place an order.

Initial Margin = Notional Value / Leverage

U-margined nominal value = order price * quantity * contract size

Opening loss: U-margined opening loss = quantity * contract size * abs {min[0, order direction * (mark price - order price)]}

Order direction: 1 represents a long order; -1 represents a short order

Example:

U-margined contract. The price is 60000. Open long 10000 BTCUSDT contracts. The contract size is 0.0001BTC, 10X. The mark price now is 55000.

Initial Margin = 60000*10000*0.0001/10 = 6000

Opening loss = 10000*0.0001*5000 = 5000

Opening margin = 6000+5000 = 11000

Average opening price

When an open position occurs, the average price of the open position is recalculated.

Example: Trader A now holds multiple positions of BTCUSDT long position 0.5, opening price of 5000 USD. An hour later, Trader A decides to open an additional 0.3 position at 6,000 USD.

Below are the formulas and calculation steps for the average opening average price:

-Average open price = USDT total contract value/total contract quantity

-Total contract value in USDT= [ (contract quantity 1 * price 1) + (contract quantity 2 * price 2)...]

We obtain the following data:

The total value of the contract in USDT

=[(Contract quantity 1 x price 1) + ( contract quantity 2 x price 2)]

= [ (0.5 x 5000) + (0.3 x 6000) ]

= 4300

Contract total quantity

= 0.5 + 0.3

= 0.8 BTC

Average opening price

= 4300 / 0.8

= 5375

Profit/loss

After opening a position, the position and its profit and loss can be seen in real time in the position area.

Depending on the direction of your trade, the formula for calculating profit and loss is slightly different.

For multiple positions

Example:

Trader B now holds multiple positions of BTCUSDT long position 0.2, opening price of 7000 USDT. When the latest market price in the order table is shown as 7,500 USD, the unresolved profit and loss is displayed as 100 USDT.

Profit/loss= Contract quantity x (marked price - average opening price)

= 0.2 x (7500 - 7000)

= 100 USDT

For short positions

Example:

Trader C now holds a short position of BTCUSDT short position 0.4, opening price of 6000 USD. When the latest market price in the order table is shown as 5,000 USD, the unresolved profit and loss is displayed as 400 USDT.

Profit/loss= Contract quantity x (average opening price - marked price)

= 0.4 x (6000 - 5000)

= 400 USDT