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What is the 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 margin.

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

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

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

What is the initial margin?

The initial margin is the minimum amount to deposit in collateral to open a trade. It is equal to a 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 can I cross-margin positions?

At any time, you can add margin (+) to open positions, clicking on the Actions part of the Open Positions blotter. This way, you will reduce the leverage of the open position and decrease the probability of a liquidation event.

For open positions with positive P&L, you can also reduce margin (-), clicking on the Actions part of the Open Positions blotter. This way, you will increase the leverage of the open position, but this will also increase your margin available for other positions. You can also cash in and withdraw instantly this PL back to your wallet.