Introduction to the isolated mode of Single/Multi-currency/Portfolio margin
Trading rules
When users conduct transactions in single-currency isolated margin mode, the available balance of this currency in their accounts should be greater than or equal to the amount of the same currency required by the order.
When users conduct transactions in multi-currency isolated margin mode, the overall adjusted equity in their accounts should be greater than or equal to the hold equity of the corresponding pending orders, and the available balance of this currency should be greater than or equal to the amount of the same currency required by the order.
Isolated margin mode
1. In isolated margin mode, the margin pair users traded will be displayed in the form of margin positions, as shown below.
2. Principle of initial margin: When users open long positions, only trading currency of the pair can be used as margin currency. When users open short positions, only quote currency of the pair can be used as margin currency.
For example:
If you want to open long positions with BTC in BTC/USDT isolated margin trading, you must have a balance in BTC as margin in your account. If you want to open short positions with BTC in BTC/USDT isolated margin trading, you must have a balance in USDT as margin in your account;
Now open a 10X long position of 1 BTC, then 0.1 BTC is required as margin (the available balance in single-currency cross account should be greater or equal to 0.1 BTC). If the filled price is 10,000 USDT, then 10,000 USDT needs to be borrowed. If the transaction is not filled, no currency will be borrowed, no interest will be accrued, but the margin will be on-hold.
After the transaction is filled, you will open a long position: the position asset is 1 + 0.1 = 1.1 BTC, and its liability is 10,000 USDT.
3. Principle of closing positions: only position assets can be used to close a position, and the position will be closed when its liabilities are paid off; when closing a position, users can choose whether to use "reduce only".
Perpetual/futures in isolated margin mode
In isolated margin mode, perpetual/futures support both Hedge mode and One-way mode, as shown in the following figures:
(1)Hedge mode
(2)One-way mode
Isolated margin options
The isolated options positions are shown as follows:
Risk Assessment
The risks of isolated positions in different business lines are measured separately, and the risks of isolated positions are segregated from that of cross positions. The risk assessment of isolated positions is based on the margin level, and the calculation methods for different trading products are slightly different.
Isolated margin positions
A liquidation alert will be triggered if the margin level of an isolated position is < 300%, and the system will send a liquidation alert to the account, letting you know the risk of liquidation. 300% is an alert parameter, and OKX reserves the right to adjust this parameter according to the current situation.
When the margin level <= 100%, the system will cancel all orders related to your position.
After cancellation, if the margin level > 100%, the account will revert to normal. Your position will be reduced or liquidated if the margin level remains <= 100% after all orders have been canceled.
1. Examples of liquidation calculation:
Long margin positions in BTC/USDT with BTC as the margin currency:
If a user holds a large position at tier 2 or above (that is, the borrowed BTC amount ≥100, like 110), and the margin level of the position is lower than 100%, the liquidation system will not directly liquidate the whole position. Instead, a partial liquidation will be executed.
The system will calculate the position amount that needs liquidating to lower the position tier by 1 level.
Position amount that needs liquidating = current borrowed amount - max borrow amount of tier 2 =110-100 =10.
If a user's position is at tier 1 with the margin level lower than 100%, or if the user's position is at tier 2 or above, but the margin level calculated according to the maintenance margin ratio(MMR) of the lowest tier is lower than 100%, the system will directly liquidate the whole position at the bankruptcy price (the price at which all margins are lost out).
2. Examples of margin level calculation:
Short margin positions in BTC/USDT with USDT as the margin currency：
The user's asset in the position is 3,299,800 USDT, the liability is 110 BTC, the interest is 0.5 BTC, the mark price is 19,500, and the taker fee rate is 0.01%.
Maintenance margin = (liability + interest) * maintenance margin ratio * mark price = (110 + 0.5) * 4.00% * 19,500 = 86,190 USDT
Liquidation fee = (liability + interest) * (1 + maintenance margin ratio) * taker fee rate * mark price = (110 + 0.5) * (1 + 4.00%) * 0.01% * 19,500 = 224.094 USDT
Margin level = [assets in the position - (liability + interest) * mark price] / (maintenance margin + liquidation fee)=[3,299,800 - (110 + 0.5) * 19,500] / (86,190 + 224.094) = 1325.0732%
In this case, the account is at a safe status. When the mark price rises to 29,000, it will be:
Maintenance margin = (110 + 0.5) * 4.00% * 29,000 = 128,180 USDT
Liquidation fee = (110 + 0.5) * (1 + 4.00%) * 0.01% * 29,000 = 333.268 USDT
Margin level = [3,299,800 - (110 + 0.5) * 29,000] /(128,180 + 333.268) = 74.1558%
In this case, the position will be liquidated as the margin level is less than 100%. After the position tier is lowered by 1 level (lowered from level 3 to level 2), the liquidated amount will be 10 BTC. If the margin level is still less than 100% after the liquidation, the liquidation will continue, and the position tier will be lowered by another 1 level (lowered from level 2 to level 1, and the amount of liquidated position will be 50 BTC). The liquidation process will end if the margin level of the position after liquidation is > 100%. But if the margin level is still less than 100% when the position is at level 1, the system will directly liquidate the position out at the bankrupt price (the price at which all margins are lost).
Isolated perpetual/futures positions
A liquidation will be triggered when the margin level of an isolated position is < 300%, and the system will send a liquidation alert to the account, letting you know the risk of liquidation. 300% is an alert parameter, and OKX reserves the right to adjust this parameter according to the current situation.
When the margin level <= 100%, the system will cancel all orders related to your position.As first instrument open order.
After cancellation, if the margin level > 100%, the account will revert to normal. Your position will be reduced or liquidated if the margin level remains <= 100% after all orders have been canceled.
The liquidation rules are as follows:
For a position at tier 3 or above, if the margin level calculated based on the current tier is less than 100%, but the margin level calculated based on the maintenance margin ratio(MMR) of the lowest tier is more than 100%, the positions will not be fully liquidated. The system will calculate the position amount that needs liquidating to lower the position tier by 2 levels, and the positions will be liquidated at the bankruptcy price. If the margin level after the partial liquidation is more than 100%, the liquidation process will end; if the margin level is less than 100%, the liquidation process will continue.
In the Hedge mode, if a user holds both long and short positions, the pairs of long/short positions will be closed immediately. If the margin level reaches the required maintenance margin ratio, the liquidation will end; if not, the liquidation will continue.
Example: Take the BTCUSD futures contract as an example.
If a user holds a large position at tier 3 or above (that is, the position amount ≥ 22,001, like 30,000), and the margin level of this position is lower than 100%, the liquidation system will not directly liquidate the whole position. Instead, a partial liquidation will be executed.
The system will calculate the position amount that needs liquidating to lower the position tier by 2 levels.
Position amount that needs liquidating = current position amount - max amount of tier 2 = 30,000 - 3,000 = 27,000.
If a user's position is at tier 2 and below with the margin level lower than 100%, or if the user's position is at tier 3 or above, but the margin level calculated according to the maintenance margin ratio of the lowest tier is lower than 100%, the system will directly liquidate the whole position at the bankruptcy price (the price at which the entire margin is lost).
Isolated options positions
If the margin level of an isolated position is < 300%, the system will send a liquidation alert to the account, letting you know the risk of liquidation. 300% is an alert parameter, and OKX reserves the right to adjust this parameter according to the current situation.
When the margin level <= 100%, the system will cancel all orders related to your position.
After cancellation, if the margin level > 100%, the account will revert to normal. Your position will be reduced or liquidated if the margin level remains <= 100% after all orders have been canceled.
The liquidation rules are as follows:
The pending close-orders of the position will be canceled first. If the margin level after the order cancellation is more than 100%, the account will go back to safe status; if the margin level is less than 100%, a partial or full liquidation will be executed.
For a position at tier 2 or above, if the margin level calculated based on the current tier is less than 100%, but the margin level calculated based on the margin factor of the lowest tier is more than 100%, the position will not be fully liquidated. The system will calculate the position amount that needs liquidating to lower the position tier by 1 level, and the position will be liquidated at the mark price. The liquidation fee will be charged according to the margin requirement for the corresponding liquidated position tier( the liquidation fee will make up for the loss of the liquidation engine, and the remaining will be added to the insurance fund).
If the margin level after the partial liquidation is more than 100%, the liquidation process will end; if the margin level is less than 100%, the liquidation process will recur until the position returns to a safe status.
Example: Take the ETHUSD-20201225-600-P options contract as an example.
If a user holds a large position at tier 3 or above ( that is, the short position amount ≥ 2,000, like 2,500), and the margin level of this position is lower than 100%, the liquidation system will not directly liquidate the whole position. Instead, a partial liquidation will be executed.
Position amount that needs liquidating to lower the position tier (by 1 level) = current position amount - max amount of tier 2 = 2,500 - 2,000 = 500.
If a user's position is at tier 1 with the margin level lower than 100%, or if the user's position is at tier 2 and above, but the margin level calculated according to the margin factor of the tier 1 is lower than 100%, the system will directly liquidate the whole position at the mark price. The liquidation fee will be charged according to the margin requirement for the corresponding liquidated position tier. The liquidation fee = ( Option face value maintenance margin-mark price) * the contract multiplier * number of contracts * the margin multiplier, will be made up for the loss of the liquidation engine, and the remaining will be added to the insurance fund.
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Liquidation in isolated position mode The margin level for isolated margin mode is calculated independently. When the margin level falls below 100%, the isolated position will be forcibly reduced or liquidated. If there is a remaining balance in isolated positions, it will be transferred from the position balance to the account balance. (Note: There may be some remaining balance due to issues with accuracy)