Leverage

ZMO offers up to 100x Leverage on its futures products. 100x leverage is offered for Bitcoin and Ethereum, while most altcoins can be leveraged up to 20x. Note that while leverage enables you to maximize trading power and profits, it can also amplify your losses and risk of liquidation.

Below, we discuss how leverage affects initial margin and maintenance margin requirements by providing illustrative examples.

What is Initial Margin?

Initial Margin is the minimum amount of funds you need in your margin trading wallets (either Cross Wallet or Isolated Wallets) to open a new trading position or to maintain an active order. This amount is specified in USDT or an equivalent value in another currency.

How is Initial Margin Calculated?

The Initial Margin required depends on the amount of leverage you use for your trade. Higher leverage means that you can control a larger position with a smaller amount of capital, which in turn lowers the percentage of Initial Margin required. Here's the formula to calculate it:

Initial Margin = Notional Value × (Initial Margin Percentage + (Taker Fee Percentage × 2))

• Notional Value is calculated by multiplying the price at which your trade is filled (Fill Price) by the size of your position in the respective futures contract (Position Size).

• Initial Margin Percentage is determined by your leverage, calculated as 1 divided by the leverage amount.

• For example, using 100x leverage means the Initial Margin Percentage is 1/100, or 1%.

Example Calculation:

Let's break down an example where you want to place a limit order in the BTC-PERP (Bitcoin Perpetual Futures) market under the following conditions:

• Limit Price: $30,000 (the price you want to buy/sell 1 BTC)

• Position Crypto Size: 1 BTC

• Leverage: 100x

• Taker Fee Percentage: 0.05%

Using the formula:

• Notional Value = $30,000 (Fill Price) × 1 BTC (Position Crypto Size) = $30,000

• Initial Margin = $30,000 × (1/100 + 0.05% × 2) = $30,000 × (0.01 + 0.001) = $30,000 × 0.011 = $330

Therefore, the Initial Margin required to open this position would be 330 USDT.

This calculation shows how leveraging your trade affects the Initial Margin required, allowing you to trade larger positions with a relatively small amount of capital. Remember, while higher leverage can amplify profits, it also increases the risk of losses.

What is Maintenance Margin?

Maintenance Margin is the minimum balance you need to maintain in your futures trading wallets in order to keep your trading positions open. This balance is required to be in USDT or its equivalent value in another currency.

How is Maintenance Margin Calculated?

The amount of Maintenance Margin required is impacted by the risk limit level you select. Opting for a higher risk limit increases the Maintenance Margin percentage. If you decide to adjust your risk limit level at any point, the new Maintenance Margin percentage will apply to the entire size of your position.

The formula for calculating Maintenance Margin is as follows:

Maintenance Margin = Notional Value × (Maintenance Margin Percentage + Taker Fee Percentage + Funding Rate Percentage)

• Notional Value is calculated by multiplying the current market price (Mark Price) by the size of your position in the futures contract (Position Size).

• Funding Rate Percentage is adjusted based on the position's direction: assign 0% for negative percentages in long positions and for positive percentages in short positions to simplify calculations.

When Do You Risk Liquidation?

Your positions may be at risk of liquidation—either full or partial liquidation, or triggering a forced market buy/sell—when the market price (Mark Price) hits the Liquidation Price. This happens if the value of your margin wallet drops to or below the Maintenance Margin requirement.

Example Calculation:

Let's illustrate with an example in the BTC-PERP (Bitcoin Perpetual Futures) market, assuming you hold a long position under these conditions:

• Mark Price: $30,000

• Position Crypto Size: 1 BTC

• Maintenance Margin Percentage: 0.5%

• Taker Fee Percentage: 0.05%

• Funding Rate Percentage: 0.001%

Using the formula:

• Notional Value = $30,000 (Mark Price) × 1 BTC (Position Crypto Size) = $30,000

Maintenance Margin = $30,000 × (0.5% + 0.05% + 0.001%) = $30,000 × 0.551% = $165.3

Therefore, to keep this position open, you would need a Maintenance Margin of 165.3 USDT.

This example demonstrates the importance of understanding and managing your Maintenance Margin to avoid the risk of liquidation, especially in volatile market conditions.