**1. What is Margin?**

Margin is a good-faith deposit or an amount of capital one needs to post or deposit to hold the position.

Position Margin = Initial Margin + added/removed margin

Where:

Initial Margin = multiplier * quantity / （leverage * price）

**2. Relationship between margin and leverage **

Leverage allows traders to enter a position that is worth much more by committing only a little amount of money. The gain or loss is, therefore, greatly magnified.

Example:

Suppose BTC is currently trading at $10,000, a user intends to enter into a position worth 1BTC with leverage of 10.

*The quantity of contracts opens = 1 BTC * 10, 000 USDT per BTC / Multiplier= 1 * 10,000 / 1 = 10,000 *

*Margin needed = Multiplier / (BTC price * Leverage) = 1 * 10,000 / (10,000 * 10) = 0.1 BTC *

Reminder: Higher leverage indicates a higher return, but also higher risks. Please make sure you understand the risk before you use high leverage.

**3. Leverage, Initial Margin, Maintenance Margin, and Margin Rate**

Leverage: The leverage user chose to open a position

*Initial Margin Rate: 1/Leverage*

*Initial Margin = Multiplier / (Average Open Price * Leverage)-Fee*

Maintenance Margin Rate (MMR): Minimum margin rate used to maintain the current position. Different maintenance margin rate may result in different liquidation price. If the underlying index price reaches the liquidation price, the deleverage/liquidation procedure will be triggered.

Maintenance Margin Rate is used to calculate liquidation price,

*Est. Liquidation Price (Long) = (1 + MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) - fee + Position Margin)*

*Est. Liquidation Price (Short) = (1 - MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) + fee - Position Margin)*

*Margin Rate = (Initial Margin + Unrealized PnL) / Position Value = (Initial Margin + Unrealized PnL) / (Position * Multiplier / Last Price)*

Example:

Suppose the **latest contract price** is **$10,000**, one user enters into a 10X leverage **LONG** position worth 1 BTC, which equals 10,000 contracts (Tier 1 Risk Limit). The maintenance margin rate requirement for this position is 0.5%.

*At this moment, user’s Initial margin Rate = 1/10 = 10%*

*Margin = Multiplier * Quantity /(Average Open Price * Leverage)= 10，000 * 1 / (10,000 * 10) = 0.1 BTC*

*Est. Liquidation Price (Suppose fee=0) = (1 + MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) - fee + Position Margin) = **（1+0.5%**）* 10000 * 1 / **（（10000 * 1 / 10000)**）-0 + 0.1**） = $ 9136.36*

If the **latest contract price** plunges to **$9135 **and the **underlying** **index price** is **$9138**

Unrealized PnL = *Multiplier* * Quantity / Average Price – *Multiplier* * Quantity / Latest Price =

*1*10000/10000-1*10000/9135=-0.09469*

Then the *Margin Rate = (Margin + Unrealized PnL) / Position Value =**（0.1 -0.09469**）／（1*10000/9135**）=0.00485**=0.485%*

Since the index did not reach the liquidation price, the position will not be deleveraged/liquidated.

**4. Changing the margin on your position**

Users can increase or decrease the margin in all positions, this will help manage risks. Leverage and liquidation price will change automatically after the changes were made.