What is the margin?

What is the trade margin?

When buyers and sellers want to enter a Bitcoin derivatives position, to make sure they honor their contractual obligations, trading platforms require them to deposit and maintain an account funded with Bitcoin as collateral: this is called the trade margin.

For a given trade margin and leverage, quantity and liquidation are automatically computed: trade margin = quantity / (price X leverage).

On LN Markets, each trade margin is dedicated to a specific position. Hence, a trader can have different positions with a specific trade margin policy for each one.

Trade margin is expressed in sats (1 BTC = 100,000,000 satoshis or sats).

What is the margin?

The margin is the minimum amount to deposit in collateral to open a trade. It is equal to a trading margin computed for a given quantity and leverage plus a maintenance margin, which is the minimum amount to keep your position open (it includes closing fees).

What is the maintenance margin?

The maintenance margin represents the lowest required balance to keep your position or order active. It encompasses a reserve to cover the costs associated with opening and closing the position.

When an order is executed (whether it’s an opening or closing order), the fees are subtracted from the maintenance margin. For market orders, this deduction occurs immediately upon placing the order, as the execution is instantaneous.

What is the margin ratio?

When the margin ratio reaches 100% your position is liquidated. Margin ratio = maintenance margin / (initial margin + P&L - Fee).

How to add margin?

You can add margin to your running positions at any time by clicking the ”+” button in the Actions section of the Running Positions blotter. This action will reduce the leverage of your running position, thereby decreasing the likelihood of a liquidation event.

How to cash in?

You can cash in from your running positions at any time by clicking the ”-” button in the Actions section of the Running Positions blotter. When you cash in, funds are first deducted from the trade’s profit and loss (P&L), if applicable, and then from the trade’s margin. Please note that cashing in increases the trade’s leverage; therefore, not all of the margin will be available, as leverage is subject to limits.