Futures

LNM Futures is a derivative perpetual futures contract whose underlying asset is a weighted basket of BTCUSD perpetual futures from multiple exchanges, such as Bybit, Binance, Deribit or BitMEX.

It is designed to capture the performance of various BTC/USD perpetual contracts across different exchanges or platforms.

Key characteristics

Diversification of Exchange Risk: This construction helps mitigate the risks associated with any single exchange. If a particular exchange experiences disruptions, LNM Futures would still be exposed to the performance of BTC/USD on other exchanges.

Reduced Impact of Funding Rates: Since perpetual futures have a funding rate to maintain price parity with the spot market, an aggregated basket balances out extreme funding rate variations across platforms.

Efficient Exposure to Market-Wide BTC/USD: Traders have a single product that gives them exposure to a broader market view of BTC, instead of betting on the price from a single exchange, which might have unique influences (liquidity, trader sentiment, etc.).

Improved liquidity: Since the trade is executed across a basket of order books, LNM can provide significantly better liquidity than what a trader would typically find on a single exchange.

Price reference

The BTCUSD Basket Last Price serves as the benchmark for calculating profit and loss (P&L) and triggering events such as liquidation, take profit, or stop loss. It is a weighted average of the last traded prices of BTC/USD perpetual futures from the exchanges included in LN Markets’ selected basket. The current composition of the basket is as follows:

Loading exchanges weights...

This composition may be modified without prior notice.

Market liquidity

LN Markets provides continuous pricing for buying or selling any quantity of LNM Futures. However, the liquidity available for different quantities can fluctuate based on market conditions. This means the price quoted by LN Markets may vary depending on the size of the trade, with larger quantities potentially impacting the price offered.

To help traders understand this liquidity variation, the volume ladder is a visual tool that displays the immediate liquidity available on LN Markets. It shows how much can be bought or sold at different price levels in real time, giving traders insight into how their order size might affect the price and helping them make informed trading decisions.

Any trading event is affected by the market liquidity.

⚙️ Example for a liquidation: consider a trader holding a long position worth USD 150,000, with a liquidation level set at 92,000. The Price reference, which determines the position’s value, is currently at 92,030. At the same time, the volume ladder indicates that the highest available bid for this quantity (USD 150,000) is at 92,010.

However, due to changes in market liquidity, the bid price for this quantity drops below the liquidation threshold of 92,000. When this happens, the position automatically gets liquidated, as the market can no longer support the position without additional margin.

This process ensures the platform minimizes losses by closing the position before its value falls further below the margin requirements. It highlights how liquidity variations can impact large positions, especially near critical thresholds like liquidation levels.

LNM Futures contract specification

Description	Value
Price Reference	BTCUSD Basket Last Price
P&L	$\text{Quantity} \times (\frac{1}{\text{Entry Price}} - \frac{1}{\text{Price Ref}})$
Liquidation Level	$\left( \frac{1}{\text{Entry Price}} + \frac{\text{Trading Margin}}{\text{Quantity}} \right)^{-1}$
Max leverage	x100
Max quantity per trade	USD 500,000
Max quantity per account	USD 10,000,000

Leverage

Leverage in trading is an investment strategy that allows one to gain exposure to a financial asset with a smaller upfront capital, known as margin.

Leverage is a double-edged sword. With a leverage of 1, you are exposed to the variations of the underlying asset. With a leverage of 2, for a long position, when the underlying asset increases by 1, your P&L increases by 2. But when the underlying asset decreases by 1, your P&L decreases by 2. And vice versa for a short position.

On LN Markets, leverage is limited to x100.

Margin

Margin modes

When trading derivatives on our platform, you can choose between two different margin modes: Isolated Margin and Cross Margin.

Understanding the difference between these two modes is essential for effective risk management and trading strategy.

1. Isolated Margin

Definition
In Isolated Margin mode, the margin you allocate to a specific position is kept separate from the rest of your account balance. Only the funds assigned to that position are at risk.

How it works

• Each position has its own margin allocation.
• If the position moves against you and the margin is depleted, only the funds in that position are liquidated.
• Other funds and positions in your account are not affected.
• You can manually add or remove margin from each position.
• Adding margin decreases the position’s leverage; removing margin increases the leverage.

Use case
Isolated Margin is ideal for traders who want to strictly limit their risk on individual trades and prevent losses from one position affecting their entire account.

Example
You open a long position on LNM Futures with 100 000 sats in Isolated Margin. If the market moves against you and your margin is exhausted, only the 100 000 sats is at risk, and your other funds remain safe.

2. Cross Margin

Definition

In Cross Margin mode, all trades within this account are aggregated and subject to a predefined leverage ratio, which determines the maximum exposure you can take. Leverage can be changed on this account at any point, assuming your available balance is sufficient to cover the margin requirements of the new leverage setting.

How it works

To open a position, you must first transfer funds from your available balance to the cross margin account. These funds will be used to cover the margin requirements of your trades.

• Margin is shared among all open positions.
• Each position maintains its initial leverage setting regardless of changes to your total account margin.
• The cross margin account provides additional collateral that can be utilized through manual leverage adjustments, but does not affect individual position leverage.
• If one position is losing, you can manually adjust leverage to utilize available funds from your cross margin account to maintain the margin and avoid liquidation.
• If your total cross margin account balance is depleted, all positions may be liquidated.

Key distinction: Your cross margin account balance is separate from your running margin. Your running margin is the actual margin allocated to active positions, while your cross margin account balance acts as additional collateral.

Avoid Liquidation You can manually change your leverage whenever needed in your cross margin account. By reducing leverage, you’ll push your liquidation price to a safer zone, reducing liquidation risk. Just make sure you have enough funds in your account first.

Use case
Cross Margin is suitable for experienced traders who want to maximize capital efficiency and are comfortable with the risk that losses from one position can affect their entire account.

Example
You have 1,000,000 sats in your cross margin account and open a position with 10x leverage using 100,000 sats as running margin. The position’s leverage remains 10x regardless of your remaining 900,000 sats.

If the position moves against you, you can manually reduce your leverage to push your liquidation price further away and reduce risk, utilizing your remaining cross margin balance. If your total account balance drops too low, all positions are at risk of liquidation.

Summary Table

Feature	Isolated Margin	Cross Margin
Margin Allocation	Per position	Shared across all positions
Leverage Control	Adjustable per position	Fixed when position opened
Collateral Source	Only position margin	Entire account balance
Liquidation Impact	Only affects that position	Can affect all positions
Capital Efficiency	Lower (funds locked per position)	Higher (shared collateral)

Tip
Choose the margin mode that best fits your risk tolerance and trading style. You can switch between Isolated and Cross Margin before opening a position.

Trade margin

When buyers and sellers want to enter a Bitcoin derivatives position, to make sure they honor their contractual obligations, exchanges and 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:

$$\text{trade margin} = \frac{\text{quantity}}{\text{price} \times \text{leverage}}$$

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).

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.

Total margin

The total margin required to open a position consists of: Total Margin = Trade Margin + Maintenance Margin

When orders are executed, fees are deducted from the maintenance margin. For market orders, fees are deducted immediately upon placement due to instant execution.

Fees

Trading fees

Trading fees are tier-based, decreasing as your trading volume increases.

Your tier is based on your 30-day cumulative volume. Check your Profile to view your current Tier.

Current tiers:

Tier	Tier 1	Tier 2	Tier 3	Tier 4
30-day cumulative volume	0	> $250k	> $1,000k	> $5,000k
Trading fee	0.1%	0.08%	0.07%	0.06%

Trading fee calculation process

1. Initial Setup: Total fee paid = 0 Maintenance margin = Opening fee reserved + Closing fee reserved Opening fee reserved = (Quantity / Entry price) × Tier1 fee Closing fee reserved = (Quantity / Initial liquidation price) × Tier1 fee

2. At Position Opening: Total fee paid = Opening fee Maintenance margin = Opening fee reserved + Closing fee reserved - Opening fee (Opening fee reserved and opening fee can be different in case of change of Tier fee)

3. At Position Closing: Total fee paid = Opening fee + Closing fee Maintenance margin = Opening fee reserved + Closing fee reserved - (Opening fee + Closing fee) (Opening fee reserved and closing fee reserved can be different in case of change of Tier fee) User receives: P&L + Margin + Maintenance margin

⚙️ Example:

For a long position with:

• Quantity: $60
• Trade margin: 10,000 sats
• Leverage: 10x
• Entry price: $60,000
• Initial liquidation price: $54,545

Calculation:

• Opening fee reserved = 100,000,000 X (60/60,000)X 0.1% = 100 sats
• Closing fee reserved = 100,000,000 X (60/54,545) X 0.1% = 60 sats
• At the time of trading, if there is no change of tier fee, total fee paid = 100 sats and maintenance margin = 100 + 60 - 100 = 60 sats
• When closing the position, if there is no change of tier fee, total fee paid = 100 + 60 = 160 sats and maintenance margin = 0

Funding fees

Funding fees in perpetual futures maintain the price of the perpetual contract close to the price of the underlying asset, known as the “spot price”. Without an expiry date, as in traditional futures, perpetual futures require a mechanism to align the contract price with the underlying asset’s market price.

The funding rate calculation is an aggregation of individual rates determined using the same methodology employed to construct the price.

⚙️ Example:

Exchange	BitMEX	Bybit	Binance	Deribit	LNM
Weight	25%	25%	25%	25%	-
Funding rate	0.02%	0.05%	0.03%	0.05%	0.0375%

Funding fee calculation process

Funding fees are payments exchanged between traders holding long (buy) and short (sell) positions.

• When funding rates are positive:
  • Long positions pay the fee
  • Short positions receive the fee
• When funding rates are negative:
  • Long positions receive the fee
  • Short positions pay the fee

This mechanism helps maintain price alignment between the futures contract and the spot market, while also indicating market sentiment. A positive funding rate suggests bullish market conditions, while a negative rate indicates bearish sentiment.

Funding fees are:

• Updated every 8 hours (00:00, 08:00, 16:00 UTC) or (12:00 AM, 8:00 AM, 4:00 PM UTC)
• Applied only to running positions
• Deducted from the position margin for paid funding fees
• Added to your balance for received funding fees
• Visible in the Funding section of your wallet, showing both received and paid fees

⚙️ Example:

For a funding rate of +0.01% (positive rate):

Long position:

• Quantity: $10,000
• BTCUSD rate: $60,000
• Funding fee paid = (10,000/60,000) × 0.01% × 100,000,000 = 1,667 satoshis

Short position:

• Quantity: $10,000
• BTCUSD rate: $60,000
• Funding fee received = 1,667 satoshis

For a funding rate of -0.01% (negative rate):

Long position:

• Quantity: $10,000
• BTCUSD rate: $60,000
• Funding fee received = 1,667 satoshis

Short position:

• Quantity: $10,000
• BTCUSD rate: $60,000
• Funding fee paid = 1,667 satoshis

Users can track all funding fees paid and received in the Funding section of their wallet.

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.

Effects of Adding Margin

When adding margin:

• Leverage decreases (reduces liquidation risk)
• Liquidation moves further from current price
• Account balance decreases by the added amount

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.

Effects of Cashing In:

When cashing in from positive P&L:

• Entry Price changes
• P&L decreases

When cashing in from margin:

• Liquidation moves closer to current price
• Leverage increases

In both cases, account balance increases by the removed amount.

Group trades

You can organize your trades in the Running Blotter for more efficient management. When trades are grouped, you can establish a take profit, stop loss, or close order that applies to the entire group. Additionally, you have the flexibility to ungroup trades at any time.

What is…?

Index price

The Index price is a weighted average of the last price of the underlying asset’s market consensus price for each constituent exchange.

Entry price

The entry price of a position is the price at which a position is opened.

Exit price

The exit price of a position is the price at which it is closed.

Quantity

The quantity is the number of contracts you want to trade.

On LN Markets, each contract is worth 1 USD, margin and P&L are expressed in sats (1 BTC = 100,000,000 satoshis or sats).

Liquidation

Liquidation is the forced closure of a running position. It occurs if the Futures price falls below the liquidation level for long positions, or rises above the liquidation level for short positions.

Margin ratio

When the margin ratio reaches 100% your position is liquidated.

Margin ratio = (maintenance margin - opening fee) / (maintenance margin - opening fee + current margin + P&L)

Market order

A market order is a buy or sell order to be executed immediately at the ask or bid price.

Limit order

A limit order is an order to buy or sell at a specific price. A limit order is not guaranteed to execute and you can cancel this order at any time before it is executed.

Take profit

A take profit order is an optional order that specifies the exact price at which to close out an open position for a profit. If the price of the underlying asset does not reach the take profit price, the take profit order does not get filled.

For a buy order, the take profit must be superior to the price of the underlying asset.

For a sell order, the take profit must be inferior to the price of the underlying asset.

Stop loss

A stop loss order is an optional order that specifies the exact price at which to close out an open position to limit a loss. If the price of the underlying asset does not reach the stop loss price, the stop loss order does not get filled.

For a buy order, the stop loss must be superior to the liquidation price and inferior to the bid price.

For a sell order, the stop loss must be superior to the offer price and inferior to the liquidation price.

Balance

The balance is equal to the sum of your margin available (to enter future positions), margin used (in open positions) and P&L in open positions.

Margin available

The margin available is the amount you can use to enter future trading positions.