Margin Specifications
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Opening and maintaining a position on Demex allows for the use of leverage. Users can allocate as much margin or as little margin as they wish for each position, up to the margin requirements stated below.
There are two types of margin requirements for each market - Initial Margin and Maintenance Margin. They differ for each market and can be derived from the market parameters in . The following describes how to calculate each margin requirement based on the market parameters.
Initial margin is the amount of collateral required to open (or increase) a position.
This margin requirement is based on a fraction (IMF) of the position value:
InitialMargin = IMF * Position Size * Entry Price
The initial margin fraction (IMF) is given by:
IMF = initial_margin_base + floor(Position Size / risk_step_size) * initial_margin_step
The underscored parameters can be found in
For a BTC perp where:
Opening a 10 BTC long position at $30,000 will require:
(0.01 + floor(10 / 0.1) * 0.000005) * 10 * 30,000 = 3,150 USDC
This gives an effective leverage of: 300,000 / 3,150 = 95.23x
One can quickly find that 1 / initial_margin_base is the maximum leverage for a market (for position sizes that are smaller than risk_step_size).
For the example above, that would be 1 / 0.01 = 100x.
Maintenance margin is the amount of collateral required to hold a position open.
This margin requirement is based on a fraction of the initial margin requirement for a position:
MaintenanceMargin = InitialMargin * maintenance_margin_ratio.
For a BTC perp where:
Opening a 10 BTC long position at $30,000 will require:
(0.01 + floor(10 / 0.1) * 0.000005) * 10 * 30,000 = 3,150 USDC
Maintaining this position requires that:
InitialMargin + Unrealized PnL > (3,150 * 0.7 = 2,205 USDC)
Assuming the user opens this position at maximum leverage (allocated margin = initial margin = 3,150), then the user's position will be liquidated if the market moves against them such that they incur more than 3,150 - 2,205 = 945 USDC of unrealized losses.
For the above example, this will occur when the Mark Price of the market reaches (10 * $30,000 - 945) / 10 = $29,905.50.
Users can protect this position by manually adding more margin or decreasing their leverage for the market, such that their allocated margin increases above the maintenance margin requirements.
If the effective margin (allocated margin + unrealized PnL) of a position drops below the required maintenance margin, the position will be liquidated according to the rules .
The maintenance_margin_ratio can be found in .
This entails the user's position being taken over by the liquidation engine, and the user will lose the full allocated margin for this position. See the section for the full liquidation procedure.