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What is the margin system of OKEx's perpetual contracts?
In OKEx's perpetual contracts system, margin acts as a safety net to reduce counterparty risk and ensure traders have sufficient funds to cover potential losses.
Oct 25, 2024 at 05:37 am
Understanding the Margin System of OKEx's Perpetual Contracts
1. Concept of Margin
In perpetual contracts trading, margin refers to a collateral deposited to provide liquidity and reduce counterparty risk. It acts as a safety net, ensuring that traders have sufficient funds to cover potential losses.
2. Margin Ratio
The margin ratio is the ratio of the margin to the face value of the contract. It determines the leverage available to traders. Higher margin ratios imply lower leverage and vice versa.
3. OKEx's Margin System
OKEx employs a cross-margin system for its perpetual contracts. This means that all perpetual contract positions share the same margin pool.
4. Types of Margins
- Maintenance Margin: The minimum margin required to keep an open position. If the margin balance falls below this level, a margin call is triggered.
- Initial Margin: The margin required to open a new position. It is typically higher than the maintenance margin.
5. Margin Call
When the margin balance falls below the maintenance margin, a margin call is issued. Traders have a limited time to deposit additional funds or close positions to meet the margin requirements.
6. Liquidation
If traders fail to resolve a margin call, their positions may be liquidated forcibly. OKEx uses a three-level liquidation mechanism:
- Partial Liquidation: Sell or buy a portion of the position to cover the deficit.
- Smart Liquidation: Liquidate positions based on market depth and avoids market impact.
- Full Liquidation: Close all open positions and settle the outstanding balance.
7. Auto-Deleveraging
In periods of high volatility, OKEx triggers auto-deleveraging. This reduces overall market leverage by liquidating positions with insufficient margin.
8. Key Features of OKEx's Margin System
- Dynamic Margin Ratio: The margin ratio is adjusted based on market volatility.
- Loss Protection: Traders can activate stop-loss orders to prevent excessive losses.
- Margin Transfer: Traders can transfer margin between different perpetual contract markets.
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