At EQONEX, accounts have the option to trade futures with leverage. This means that each dollar of notional exposure can be funded with a smaller amount of capital.
Leverage: the ratio between your margin balance and the notional exposure of your portfolio.
Total Notional Position = Position Size * Mark Price
Account Leverage = abs(Total Notional Position) / Total Account Margin
The amount of leverage available depends on your position size - to open a larger-sized position requires a relatively larger amount of capital than to open a smaller-sized position. The amount of capital required to open the position is also referred to as Initial Margin. The Initial Margin requirements for our futures positions can be found here. A trader may choose to reduce their leverage at any time by increasing the balance in their account, or by using Customized Leverage.
Initial Margin: the minimum amount of USDC required to open any new position.
The Initial Margin includes both open position(s) and open order(s) for leveraged products. Initial Margin for open positions is calculated based on the Mark Price. The Initial Margin requirement at the time of sending the order depends on the order type. When sending a limit order, the Initial Margin requirement is calculated based on the limit price. When sending a market buy order, a 0.5% buffer to the best ask price is added to the Initial Margin calculation to account for the possibility that the order is executed through the book that would increase the notional of the trade. The Initial Margin requirement for a market sell order is based on the best bid.
For Dated Futures, Delivery Margin is charged on both open positions and open order(s) from 7 days prior to expiry to avoid a user from getting liquidated on their Cross Collateral as a result of the physical delivery of a Dated Future. Delivery Margin is added to and included in the Initial Margin requirement for a portfolio.
The part of the Initial Margin that relates to open orders is called Reserved Margin. On EQONEX, Reserved Margin is split out into ‘Reserved Margin Buys’, which is the margin reserved for all open buy orders, and ‘Reserved Margin Sells', which is the margin reserved for all open sell orders.
The Initial Margin is always calculated based on the maximum notional exposure of current open positions and open orders. This means that if a trader has an open order which, if executed, would reduce the trader’s current open position, the Initial Margin would not reduce until the order is filled. The Reserved Margin Buys (if the position is short and the order is a buy order) or Reserved Margin Sells (if the position is long and the order is a sell order) will be negative, but the Initial Margin does not yet include the negative amount. Only if the orders get executed, will the Initial Margin be reduced.
Conversely, if a trader has an open order which, if executed, would increase the trader’s open position, the Initial Margin would increase immediately. This could for example be the case when a trader is long and sends a buy order, or when the trader is long and sends a sell order that would result in a short position that is larger in absolute value than the current long position. In these cases, either Reserved Margin Buy or Reserved Margin Sell would be positive, and this amount would already be included in the Initial Margin amount.
When a trader’s account’s margin level, the Total Account Margin, falls below the Initial Margin requirement, no new orders can be sent unless such order, when executed, would reduce the overall margin requirement. Existing orders remain in the order book as they are included in the current margin calculations.
Total Account Margin: total USDC equivalent notional of all assets available for margin, including any unrealized P&L, less any capital required for open non-margin (spot) orders.
Currently, only USD and USDC can be used as margin.
When the Total Account Margin reaches the level of the Margin Liquidation Trigger, the account will start to get liquidated. The Margin Liquidation Trigger is set to 50% of the Initial Margin required for the open position(s) only, not open orders, but does include 100% of any Delivery Margin required for both open position(s) as well as open orders. The Margin Liquidation Trigger is independent of the Total Account Margin in the account at the time when the trade was executed.
Margin Liquidation Trigger: the minimum amount of USD equivalent notional required to avoid liquidation. If the Total Account Margin falls below the Margin Liquidation Trigger, the account’s positions will get liquidated.
More information on forced liquidations at EQONEX, including the process and the fees, can be found here Liquidations.
For exact margin requirements per product, please refer to: Maximum Leverage
Assume a trader wants to buy 100,000 USDC worth of EQONEX BTC Perpetual Futures. To do so, the Initial Margin requirement based on the Maximum Leverage would be:
10,000 x 0.8% = 80
15,000 x 1.0% = 150
25,000 x 1.33% = 332.50
50,000 x 2.0% = 1,000
Total = 1,562.50 USDC
Such that leverage = 100,000 / 1,562.50 = 64x
The Margin Liquidation Trigger would be 50% of the initial margin requirement, 781.25 USDC.
As long as the Total Account Margin is more than 1,562.50 USDC, the trader is able to continue to buy BTC Perpetuals up to the point where the Initial Margin requirement equals their Total Account Margin balance. If the Total Account Margin balance reaches 1,562.50 USDC or below, they are no longer able to send any new buy orders. They can still send sell orders to reduce the overall exposure.
If the margin balance continues to decline to the liquidation trigger of 781.25 USDC or below, the account will be moved into forced liquidation to close down the position.
Assume a trader has an open position in a Dated Future expiring 25 March 2022 at 8am UTC. Delivery Margin starts being charged from 18 March 2022 at 8am UTC.
On 20 March 2022 at 10am UTC, the trader has a long position of 1 BTC/USDC marked at 10,000, such that the notional value of the position is 10,000 USDC. According to the Initial Margin table for BTC Dated Futures, this would result in 80 USDC of Initial Margin.
In addition to the Initial Margin requirement per the table, the trader is now being charged Delivery Margin. Assuming the Spot Price is at 9,900, the Delivery Margin is equal to 21% / 7 x 3 x 1 x 9,700 = 873 USDC.
The Initial Margin requirement that the trader will see on the UI is 80 + 873 = 953 USDC.
The Margin Liquidation Trigger for the trader is 0.5 x 80 + 873 = 913 USDC.
If the trader had open sell orders that would reduce the net position of the trader, the margin requirement would still be as above.
If the trader had open buy orders that would increase the net position of the trader, then the Initial Margin would increase by both the additional Initial Margin requirement based on the margin curve, as well as the additional Delivery Margin required. The Margin Liquidation Trigger would increase only by the Delivery Margin requirement, as no standard Margin Liquidation Trigger is charged on open orders.
Currently, EQONEX accounts can only use USD or USDC as margin for trading EQONEX perpetual futures. Any USD is converted into USDC on a 1-for-1 basis.
For further assistance or more information, please contact our Customer Support team via firstname.lastname@example.org or click on the chat widget at the bottom right-hand side of the EQONEX page.