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Spot Margin Trading Explainer
Spot Margin Trading Explainer

Explain everything about Spot and Perpetual Margin Trading on CoinUnited.io

Updated over a week ago

Spot margin trading allows users to borrow money from other users (lenders) on CoinUnited.io who are wanting to earn yield on their assets in order to trade with leverage and go short on spot markets.

Lenders set the rates, which are paid hourly. Lenders can call back their loans at any moment and get their money back in one hour.

Similar to futures, spot margin positions are governed by liquidation rules and collateral requirements.

To view the current and previous loan rates, visit: https://coinunited.io/account/borrow-rates

How do you enable spot margin trading?

Visit https://coinunited.io/account, choose "Enable Account Leverage" under the Margin section to turn margin trading on. If margin trading is enabled, any short positions of spot assets in your account will be attempted to be borrowed.

Please note that if you have spot margin enabled, your account will automatically borrow the negative USD amount from the spot margin market and pay the current USD borrow rate rather than selling your non-USD collateral whenever your USD balance falls below specific thresholds.


What assets are available for borrowing?

The list is available on the borrow pages. The majority of spot assets that are depositable and withdrawable on CoinUnited.io can be borrowed, but not all of them.


How CoinUnited.io automates borrowing?

Implementing margin trading and borrowing could be executed in a variety of approaches. CoinUnited.io users have full control over their borrowings. To request borrows, receive them, transfer the money, open/close positions, etc., there is no need for distinct operations; the entire process is abstracted away into net balances.

You can borrow spot assets by simply spending more than the amount of your account, given you have enough margin.

Let's imagine you have nothing else in your account but $100,000 (USDT). Your balances would be +140,000 USDT and -2 BTC if you sold 2 BTC for $40,000 in the spot BTC/USDT orderbook. You have to borrow the BTC for short selling since you do not have it. When you sell, CoinUnited.io does this automatically by placing an order to borrow 2 BTC from the funding book on your behalf.

Even with withdrawals, you can accomplish this! You can demand to withdraw 3 ETH even though you have no ETH in your account if your account only contains 5 BTC. You can withdraw the 3 ETH that CoinUnited.io automatically requests for you to borrow. But keep in mind that you may only borrow to withdraw for amounts that are smaller than or equal to those that are accessible and unclaimed in the borrow-lending book! Also, you need to pay attention to your Available Balance Level, which determines the Max Withdrawal Amount (with Borrowing). When it goes to 0, it means that you don’t have collateral for borrowing from the borrow-lending book, you can only request to borrow your actual spot holding, or 0 if you have spent all your collateral to maintain your spot borrowing and perpetual positions.

Therefore, managing collateral, margin positions, withdrawable tokens, margin trading, and spot trading are not necessary. As long as your account has enough total collateral to back the necessary borrowing, the same instructions (buy/sell/deposit/withdraw) function normally.

Spot and Futures Margin Trading

You do not need to keep track of a separate spot margin need since your spot margin holdings are cross-margined with your positions.

Each contract has a margin requirement (an initial margin fraction to open a position and a maintenance margin fraction to avoid liquidation), and you need a total collateral value that fulfills those thresholds of margin.

Similar to spot margin. The notional amount of any short (negative) balances you hold determines the position size of a spot margin position.

Assume that:

You have 30,000 USDT in collateral and nothing else to use.

Your account’s max account leverage is set to 400x.

The max effective spot leverage is 20x

  1. You bought 2 spot BTC at 20,000 USDT

  2. You sold 100,000 spot DOGE at 0.08 USDT

  3. You long 30 ETHUSDT_PERP at 1,500 USDT, notional value = 45,000 USDT

  4. You limit sell 100 BCHUSDT_PERP at 120 USDT, notional value = 12,000 USDT

Calculating Initial Margin Fraction (IMF)

The initial margin fraction required to open your BTC position:

= min((1 + 1 / spot_leverage) / collateral_ratio - 1, 100%)

= min((1 + 1 / 20) / 0.975 - 1, 100%)

= 7.69%

The initial margin fraction required to open your DOGE position:

= min((1 + 1 / spot_leverage) / collateral_ratio - 1, 100%)

= min((1 + 1 / 20) / 0.95 - 1, 100%)

= 10.53%

Collateral Overview

Now, using the formula below, let’s see how your total account collateral looks:

If token quantity is positive

= Token quantity * token mark price * collateral weight

If token quantity is negative

= Token quantity * token mark price

Derivatives and spot margin positions require collateral.

To know how much collateral each of your spot positions is using, use this formula:

= position notional * spot margin IMF

To know how much collateral each of your derivatives positions is using, please check the table below as example:

Total Account Value

= Notional Value of All Spot positions held + PnL of All Perpetual Positions

= 30,000 + PnL of All Perpetual Positions

Total Positive Collateral

= 39,000

Total Negative Collateral Used

= 10,000

Total Additional Collateral Used

= 1,168.32

Available Balance

= Total Positive Collateral - (Total Negative Collateral Used + Total Additional Collateral Used)

= 27,831.68

Maintenance Margin (USD)

= (Total Collateral used by outstanding spot margin borrows + sum of additional collateral used by spot margin borrows) x Spot MMR

+ (Total Collateral used by outstanding positions and open orders of perpetual) x Perpetual MMR

= (10,000 + 121.21 + 842.11) x Spot MMR + (175 + 30) x Perpetual MMR

= 451.90

In this example, Spot MMR = 0.03, Perpetual MMR = 0.60. Max Spot Margin Trading leverage is 20x. Max Perpetual Trading leverage is 888x.

CoinUnited.io reserves the right to adjust the Spot MMR, Perpetual MMR, Max Spot Margin Trading leverage, Max Perpetual Trading leverage, Collateral Ratio and other parameters based on market conditions without prior notice. For the most current updates on these figures, please refer directly to our trading platform.

How does staking affect Margin Level

Let’s continue with the above example:

1. If you stake 0.5 BTC flexible, your BTC available will be 1.5

Total Account Value is unchanged:

= Notional Value of All Spot positions held + PnL of All Perpetual Positions

= 30,000 + PnL of All Perpetual Positions

Total Positive Collateral is decreased to

= 39,000 * 1.5/2

= 29,250

Total Negative Collateral Used

= 10,000

Total Additional Collateral Used

= 1,168.82

Available Balance is affected

= Total Positive Collateral - (Total Negative Collateral Used + Total Additional Collateral Used)

= 18,081.68

Therefore, Account Margin Level = Total Net USD Value / Maintenance Margin (USD) is NOT affected by flexible staking, but you will have less Available Balance for opening new positions.

2. If you stake 0.5 BTC term, term staking amount will be excluded from Spot position calculation

Total Account Value is affected:

= Notional Value of All Spot positions held + PnL of All Perpetual Positions

= 20,000 + PnL of All Perpetual Positions

Total Positive Collateral is decreased to

= 39,000 * 1.5/2

= 29,250

Total Negative Collateral Used

= 10,000

Total Additional Collateral Used

= 1,168.82

Available Balance is affected

= Total Positive Collateral - (Total Negative Collateral Used + Total Additional Collateral Used)

= 18,081.68

Therefore, Account Margin Level = Total Net USD Value / Maintenance Margin (USD) is affected by term staking, and you will have less Available Balance for opening new positions.


Risk

Please be aware of liquidation risk of using spot margin since CoinUnited.io's risk engine will attempt to liquidate any customers before they reach a negative net account balance. CoinUnited.io and its backstop fund will generally make an effort to shield other users from the possibility of other accounts going bankrupt.

For more information, visit our liquidations page.

Disclaimers:

  • Trading on CoinUnited.io is not available in the United States or other prohibited jurisdictions. If you are located in, incorporated or otherwise established in, or a resident of the United States of America, you are not permitted to trade on CoinUnited.io.

  • CoinUnited.io retains the final right to interpretation of its rules and conditions on these and all contracts.

  • CoinUnited.io retains the final right to modify terms of its rules and conditions on these and all contracts.

  • Much of this article is an approximation and ignores details, e.g. fees.

  • When in doubt, feel free to contact us for clarifications.

  • This post outlines the basics of the CoinUnited.io spot margin system. It is not the only relevant resource, and may be overridden by other sources. Eligible parties may be asked to sign other documents in some cases, including but not limited to the CoinUnited.io Institutional Customer Margin and Line of Credit Agreement.

  • There are risk factors associated with margin trading, chiefly liquidation risk. Please decide whether margin trading is right for you.

  • As the terms of service make clear, manipulative behavior is not tolerated on CoinUnited.io. Any attempts to do so may result in account termination at CoinUnited.io’s sole discretion.


Need More Help?

For further questions or issues, visit our Help Center or use our chatbot for immediate assistance. If you can't find the answers, submit a request ticket or email us. We're here to help. Happy trading!

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