I. Concept of Cross-Asset/Isolated Margin Mode

Here is an example:

Alice has a Futures account with an asset balance of 30,000 USDT. She uses 10,000 USDT to long BTC, 10,000 USDT to long ETH and 10,000 USDT to long LTC. Take the below comparison in the two margin modes.

 

Scenario 1: ETH and LTC prices remain unchanged; while BTC price plunge, causing the loss of 10,000 USDT. Then, BTC price rebounds instantly.

1.1 In the Cross-Asset Margin mode, Alice’s collateral in the account decreases to cover the loss caused by the BTC plunge. Along with the BTC price rebound, Alice’s collateral increases. All positions in Alice’s futures account have NOT been affected.

1.2 In the Isolated Margin mode, Alice’s BTCUSDT position will be liquidated once its loss amount equals the collateral amounts for the BTCUSDT position; Alice’s ETHUSDT and LTCUSDT positions have NOT been affected.

 

Scenario 2: ETH and LTC prices remain unchanged; while BTC price plunged, causing the loss of 10,000 USDT. Then, BTC continues to drop, widening loss to 30,000 USDT.

2.1 In the Cross-Asset Margin mode, Alice’s collateral in the account decreases to cover the loss caused by the BTC plunge. Alice’s BTCUSDT, ETHUSDT and LTCUSDT positions will be liquidated when the loss equals total account value of 30,000 USDT.

2.2 In the Isolated Margin mode, Alice’s BTCUSDT position has been liquidated for the loss equals the collateral value of 10,000 USDT. Alice’s ETHUSDT and LTCUSDT positions have NOT been affected during the continuous BTC price drop.

 

The different scenarios from the Alice’s case study can explain the difference in the Cross-Asset Margin mode and the Isolated Margin mode:

 

The Cross-Asset Margin Mode

In the Cross-Asset Margin mode, all assets in the futures account can be used as collateral. However, forced liquidation would also lead to the potential loss of all assets in the futures account.

 

Take scenarios 1.1 and 1.2 for further analysis. There is a potential loss of all assets in the futures account with posting all of them as margin collateral. Low market volatility will NOT affect the positions in the futures account, but reduces the risk of forced liquidation and increases the asset utilization. However, with high market volatility, all futures positions will be liquidated when the loss reaches the level of total account value. Therefore, the forced liquidation scenario would lead to the potential loss of all assets in the futures account.

 

The Isolated Margin Mode

In the Isolated Margin mode, the user can post specific assets as separate margin collateral and under forced liquidation scenario, the potential loss will only be limited to those assets posted as collateral, vs. potentially all the assets in the futures margin in the cross-asset mode.

 

Take scenarios 1.2 and 2.2 for further analysis. Under forced liquidation scenario, the potential loss will only be limited to the assets Alice posted as collateral for the BTCUSDT position. In the isolated margin mode, low market volatility can lead to liquidation with greater possibilities. However, with high market volatility, the BTCUSDT position will be liquidated once its initial collateral up to the level of maintenance margin requirement is used up. The rest of the positions in the account will NOT be affected. Therefore, under forced liquidation scenario, the potential loss can be limited to those specific assets posted as collateral.

 

Here is another example:

Trader Bob has a Futures account with an asset balance of 30,000 USDT. Bob uses 30,000 USDT to long 1 BTC at the price of $57,000 with 5x leverage. Bob wants to buy 1 BTC more as BTC price climbs to $60,000. Take the below comparison in the two margin modes.

 

In the Isolated Margin mode, Bob has posted all assets in the futures account as collateral to his BTCUSDT position with 5x leverage. Thus, there is no asset available as collateral for Bob to open a new futures order. For this situation, Bob can increase leverage for higher asset utilization, and release partial assets from collateral posted to the BTCUSDT position through manual operation.

In the Cross-Asset Margin mode, only a small proportion of assets in the futures account is used as the initial collateral for the BTCUSDT position; while there are plenty of assets available to open new orders.

 

II. Pros and Cons of Two Margin Modes

The Isolated Margin Mode:

✓Under forced liquidation scenario, the potential loss will only be limited to those specific assets posted as collateral, vs. potentially all assets in the futures account;

✗Users cannot open new orders if all assets in the account used as collateral;

✗Under high market volatility, futures positions with higher leverage in the isolated mode will be liquidated with greater possibilities.

 

The Cross-Asset Margin Mode:

✓Lower risk exposure of forced liquidation;

✓Low initial collateral requirements, and flexible adjustment for the positions;

✗Greater possibility to lose all assets in the account under high market volatility.

 

In summary, both Cross-Asset Margin mode and the Isolated Margin mode can meet different risk management requirements. Please choose the right margin modes based on real trading scenarios and your expectation of market movement.

 

 

III. Isolated Margin Mode Instructions for Perpetual Futures Contract

Position Mode Setup

The Cross-Asset Margin mode is the default setup for a futures account. Users can switch modes on Futures Trading page. After switching, the system will automatically save the latest mode.

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Collateral Adjustment

When holding positions in the Isolated Margin mode, users can post or reduce collateral to adjust the est. liquidation price.

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LeverageSetup

The BTCUSDT perpetual futures contract supports 1~100x margin trading. Users can modify the leverage setup in the [Positions] tab on the Futures Trading page.

 

In the Cross-Asset Margin mode, leverage adjustment will lead to amount changes in position collateral and order collateral.

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In the Isolated Margin mode, leverage adjustment will not lead to the amount changes in position collateral and order collateral.

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