The margin for opening a position refers to the minimum collateral amount required to open a position in leveraged trading. The leverage used by traders is inversely proportional to the initial margin required to hold a position. The higher the leverage, the less margin is required to open a position.
Inverse contracts calculate the opening margin by using contract quantity/order price/leverage. Assuming that 100 times leverage is used when trading a contract worth 100 BTC, the trader only needs to invest 1 BTC as the initial margin (1/100).
example: The trader buys 12,000 BTCUSD contracts at 8,000 USD with 50x leverage.
Open Margin = Contract Quantity / Opening Price / Leverage
= 12,000 / 8,000 / 50
= 0.03 BTC
Average opening price
When opening a position occurs, the average opening price will be recalculated.
Example: Trader A now holds a long position of BTCUSD 1000, and the opening price is 5000 USD. An hour later, Trader A decides to open an additional 2000 positions at an opening price of 6,000 USD. Then the following is the formula and calculation steps of the average opening price.
Average opening price = total contract quantity / total BTC contract value
Substitute the numbers into the formula:
Total number of contracts
= 1,000 + 2,000
Total BTC contract value
= (1000 / 5000) + (2000 / 6000)
= 0.53333334 BTC
Average opening price
= (3000 / 0.53333334 BTC)
= 5625.00 USD
Profit and loss
After opening a position, the position and its profit and loss can be seen in real time in the position area.
The formula for calculating unrealized profit and loss is slightly different depending on the direction of your trade.
For long positions
Example: Trader B now holds a long position of 1,000 BTCUSD, and the opening price is 5,000 USD. When the latest market price in the order form is displayed as 5,500 USD, the unrealized profit and loss will be displayed as 0.01819 BTC.
Unrealized profit and loss = contract quantity x [(1/average opening price) - (1/last market price)]
= 1000 x [ (1 / 5000) - (1 / 5500) ]
= 1,000 x 0.00001819 BTC
= 0.01819 BTC
For short positions
Example: Trader C now holds a short position of 1,000 BTCUSD with an opening price of 5,000 USD. When the latest market price in the order form is displayed as 4,500 USD, the unrealized profit and loss will be displayed as 0.02223 BTC.
Unrealized profit and loss = contract quantity x [(1/latest market price) - (1/average opening price)]
= 1000 x [ (1 / 4500) - (1 / 5000) ]
= 1,000 x 0.00002223 BTC
= 0.02223 BTC
a) Inverse contracts, i.e. currency-margined contracts, where your profits and losses are settled in the currency traded, not in USD. The US dollar here is mainly used as a quotation mechanism, just for the convenience of traders.