What are Bybit's U-margined contracts?

Understanding Bybit's U-Margined Contracts

Bybit’s U-margined contracts are derivative financial instruments that allow traders to speculate on cryptocurrency price movements using USDT (Tether) as the margin and settlement currency. These contracts are settled in stablecoins, making them less volatile than their coin-margined counterparts. Traders can take long or short positions based on their market outlook, with leverage amplifying both potential gains and risks.

1. U-margined contracts use USDT as collateral, which provides stability compared to volatile cryptocurrencies like Bitcoin or Ethereum. This helps traders better manage risk exposure when entering leveraged positions.
2. These contracts support multiple cryptocurrencies including BTC, ETH, SOL, and others, allowing diversified trading strategies within a single account.
3. Positions are quoted and settled in USDT, meaning profits and losses are directly reflected in the stablecoin balance.
4. The system calculates liquidation prices based on maintenance margins and funding rates, helping users monitor their risk levels in real time.
5. Funding fees are exchanged between long and short positions every eight hours, aligning the contract price with the spot market.

Leverage and Risk Management Features

One of the defining characteristics of U-margined contracts is the availability of adjustable leverage, giving traders control over their capital efficiency and exposure level.

1. Leverage ranges from 1x up to 100x depending on the asset, enabling aggressive strategies for experienced traders while allowing conservative approaches for beginners.
2. Traders can adjust leverage dynamically without closing their position, providing flexibility during fast-moving markets.
3. Initial margin is calculated by dividing position size by leverage, determining how much USDT must be allocated to open a trade.
4. Maintenance margin represents the minimum equity required to keep a position open; falling below this threshold triggers liquidation.
5. Partial liquidations may occur in cross-margin mode if equity drops too low, reducing position size incrementally instead of full closure.

Funding Rates and Market Alignment

To ensure that futures prices remain close to the underlying spot value, Bybit implements a funding mechanism specific to U-margined perpetual contracts.

1. Funding rates are exchanged every eight hours between buyers (longs) and sellers (shorts), depending on whether the contract trades at a premium or discount to the index price.
2. When funding rates are positive, long positions pay shorts; when negative, shorts pay longs.
3. This mechanism discourages prolonged deviations from fair market value and supports price convergence without affecting the trader’s margin directly.
4. The rate is determined by the interest rate component plus a premium based on the price difference between the perpetual contract and the underlying index.
5. Traders can view upcoming funding times and estimated costs in the order interface before opening positions.

Trading Interface and Order Types

Bybit offers an advanced yet intuitive platform for executing U-margined contract trades, supporting various order types and risk controls.

1. Limit, market, stop-limit, and stop-market orders are available, allowing precise entry and exit strategies.
2. Take-profit and stop-loss levels can be set upon order placement or adjusted after entry, enhancing automated risk management.
3. The dual-price mechanism separates mark price from last traded price to prevent unfair liquidations due to temporary price spikes or manipulation.
4. Users can switch between isolated and cross-margin modes, each offering different risk distribution models across positions.
5. Real-time PnL tracking, ROI percentages, and break-even price indicators help traders assess performance instantly.

Frequently Asked Questions

What happens when a U-margined contract gets liquidated?When a position’s equity falls below the maintenance margin requirement, the system automatically closes it to prevent further losses. In cross mode, partial closures might happen first. Remaining funds, if any, stay in the account.

Can I hold U-margined positions indefinitely?Yes, since these are perpetual contracts, they don’t have an expiration date. However, holding positions long-term requires paying or receiving periodic funding fees every eight hours.

Is there a difference between mark price and last traded price?Yes. The mark price is used for calculating unrealized PnL and preventing premature liquidations. It’s derived from external index prices and funding rates, whereas the last traded price reflects actual recent transactions.

How does Bybit handle sudden volatility in U-margined markets?The platform uses a tiered liquidation system and insurance fund to manage extreme volatility. If forced liquidations fail to cover losses, the Insurance Fund covers the shortfall, protecting profitable counterparties.