How to calculate Bitget contract margin

For isolated margin mode, the contract margin is determined by multiplying the position size, leverage, and mark price.

Nov 09, 2024 at 06:26 pm

How to Calculate Bitget Contract Margin

Introduction

Bitget, a leading cryptocurrency exchange, offers a comprehensive contract trading platform that allows users to trade various perpetual and futures contracts with leverage. Understanding the calculation of contract margin is crucial for effective risk management and successful trading. This guide will provide a detailed explanation of how to calculate Bitget contract margin, covering both isolated and cross margin modes.

Step 1: Identify Contract Margin

Contract margin refers to the amount of collateral required to open and maintain a position in a futures or perpetual contract. It serves as a buffer against potential losses and ensures that traders have sufficient funds to cover adverse price movements.

Step 2: Understand Isolated vs. Cross Margin

Bitget offers two margin modes: isolated and cross margin.

• Isolated Margin: Each position's margin is independent of other positions. If one position is liquidated, it will not affect other open positions.
• Cross Margin: All open positions share the same margin pool. If one position's losses exceed its allocated margin, it may draw funds from other open positions to prevent liquidation.

Step 3: Calculate Margin for Isolated Margin Mode

For isolated margin mode, the contract margin is calculated separately for each position. The formula is:

Contract Margin = Position Size Leverage Mark Price

• Position Size: Number of contract units being traded.
• Leverage: Ratio of borrowed funds used to trade compared to personal funds.
• Mark Price: Current fair market price of the contract.

Example:

Assuming you want to open a long position on the BTCUSDT perpetual contract with a position size of 100 contracts, a leverage of 20x, and a Mark Price of $40,000:

Contract Margin = 100 20 $40,000 = $800,000

Step 4: Calculate Margin for Cross Margin Mode

For cross margin mode, the contract margin is calculated across all open positions collectively. The formula is:

Contract Margin = (Σ Position Size Entry Price Leverage) / Unrealized PnL

• Σ Position Size: Sum of the position size of all open positions.
• Entry Price: Price at which each position was opened.
• Leverage: Leverage applied to each position.
• Unrealized PnL: Total unrealized profit or loss across all open positions.

Example:

Assuming you have two open positions:

• Long Position: 100 BTCUSDT contracts, Entry Price $40,000, Leverage 20x.
• Short Position: 50 ETHUSDT contracts, Entry Price $2,000, Leverage 10x.

Total Σ Position Size: 100 + 50 = 150 contracts

Total Leverage: 20 100 + 10 50 = 2,500

Unrealized PnL at the time of calculation: -$20,000

Contract Margin = (150 * $40,000 * 2,500) / -$20,000 = $750,000

Step 5: Monitor Margin Utilization

Margin utilization measures the percentage of your available margin that is being used to maintain open positions. The formula is:

Margin Utilization = (Used Margin / Available Margin) * 100%

• Used Margin: Total contract margin of all open positions.
• Available Margin: Total funds available in your trading account, including any unrealized PnL.

High margin utilization indicates that you may be using leverage too aggressively, increasing your risk of liquidation. It's important to monitor margin utilization closely and adjust your positions accordingly.

Step 6: Avoid Liquidation

Liquidation occurs when your margin utilization reaches 100% and your account balance drops below the required margin level. To avoid liquidation, monitor your positions regularly and adjust your risk exposure as needed by closing positions or adjusting leverage.

Step 7: Use a Margin Calculator

Bitget provides a Margin Calculator tool in its trading interface to assist users in calculating contract margin and monitor their exposure. The calculator takes into account the current market price, position size, leverage, and margin mode.