Deribit margin trading

Margin trading is trading with leverage (leverage), i.e. on borrowed funds. The user, when trading with leverage, can place orders more than his deposit allows. Correspondingly, the profit will be bigger. The main drawback is that in case of wrong calculations losses will be much larger than the deposit. At the exchange Deribit there is a mechanism of forced closing of positions in case of exceeding the loss of permissible parameters, but, understandably, the lost money is not returned to the user.

Therefore, margin trading is one of the riskiest ways to make money on crypto exchange. The leveraged trading method requires very good practical skills. On the website deribit.com Leverage trading is not put in a special section, it is offered by default in the trading terminal. But trading, as well as crediting the deposit, is possible only after verifying the account.

Terminal

In the trading terminal for futures leverage data is placed in the buy and sell service to the left of the price chart.

When the user has money on the deposit, it will be possible to set the leverage with the required parameters. Initially, the maximum leverage of 50x is available to the user, both for limit orders, as well as for market and other order types (activated by clicking on the order type “market”). Depending on conditions, the leverage can be increased up to 100x when trading futures. For options trading, leverage is available from 10x. To see the trading parameters, you need to click on the selected option in the terminal. The Put and Call options are selected at the top of the buy/sell service.

For each order, the exchange requires users to maintain margin requirements (collateral) on open orders, depending on the asset and value of the position. If the balance is below the requirements, the platform automatically closes the open orders.

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Specifications

On the platform the underlying asset of the futures contract is Deribit index BTC. “Physical” delivery of cryptocurrencies is not carried out, calculations are made in the format of profit or loss on the contract. At trading the initial and supporting margins are applied. The minimum contract size is $10, the initial leverage reaches 100x, according to the initial margin of 0.1%. If the trader increases the position up to 100 BTC, the margin increases by 0.5%. The maximum position a trader can place is 1 million contracts (10 million $), but with leverage the contract can be larger.

Supporting margin starts at 0.525%, and increases by 0.5% when reaching 100 BTC. By the way, the parameters of the supporting margin exchange can change without notifying the user. On futures Ethereum the underlying asset Deribit index ETH. The contract size is the same as in BTC, $10. The maximum possible contract reaches 5 million contracts (5 million $). Margin trading allows you to go beyond this limit.

The starting margin for ETH futures is 2%, i.e. a leverage of 50x is available. Initial margin increases by 0.1% when the position size reaches 5 thousand ETH. Supporting security starts from 1%, i.e. 10x. When the position reaches 5 thousand ETH, the supporting margin also increases by 1%. Deribit Perpetual, an open-ended futures contract: this financial instrument’s margin trading conditions for BTC are exactly the same as those for conventional futures. The terms of ETH perpetual contracts also correspond to those of Ether futures, but the maximum possible order size of Ether perpetual futures reaches 10 million contracts, i.e. 10 million $.

For unrestricted contracts, you should also keep in mind that the platform seeks to keep the price of the derivative close to an exchange index, in particular the Deribit BTC index. For this purpose, the practice of additional financing is developed: if the contract is higher than the index, traders with long positions (buyers) make payments to traders with short positions (sellers). If the derivatives are below the index, the sellers pay financing to the buyers.

Options

The underlying asset for bitcoin options is the BTC exchange index, for etherium options – the ETH index. The minimum order size is 0.1 option for BTC, for ETH – 1 option contract. Initial margin for options is the amount set aside to open orders, and supporting collateral is the amount set aside to support them.

Portfolio margining

The Deribit platform has a financial instrument called portfolio marginization. In this case, positions are traded in which futures and options are combined simultaneously and can be traded with increased leverage. To gain access to this tool, a user must have 0.25 BTC or 7.5 ETH on deposit and have real experience in trading options consistently and profitably. The leverage size for each trader in portfolio marginization is determined by confidential parameters.