How to calculate the margin of perpetual contract?

Perpetual contract margin refers to the guarantee that traders must deposit in advance when trading perpetual contracts. The calculation formula is: margin = contract face value x number of contracts x margin rate. The margin rate is set by the exchange or platform to manage transaction risks. A higher margin rate reduces the leverage ratio and reduces the possibility of losses, but it also increases the occupation of funds. When the margin is insufficient, the exchange will issue a call notice, and failure to replenish the margin may result in forced liquidation.

Perpetual Contract Margin Calculation Method

What is Perpetual Contract Margin?

Perpetual contract margin refers to a certain amount of money that traders must pre-deposit into their account when trading perpetual contracts as a guarantee for the transaction.

How to calculate the perpetual contract margin?

The calculation formula of perpetual contract margin is as follows:

Margin = Contract Face Value material value.

Number of contracts: The number of contracts held by the trader.

Margin rate:
• The margin ratio set by the exchange or platform, usually a certain percentage of the face value of the contract.
• Example:
Suppose the face value of a perpetual contract is $100 and the margin rate is 20%. If a trader holds a contract, the margin is calculated as follows:
• Margin = $100 x 1 contract x 20% = $20

The meaning of the margin rate

The margin rate is set to manage trading risks. A higher margin ratio reduces a trader's leverage, thereby reducing the likelihood of losses. However, higher margin rates also increase traders' capital usage.

When the margin is insufficient

If the trader's account has insufficient margin, the exchange or platform will issue a margin call notice. Traders need to top up their margin within the specified time, otherwise their positions may be forced to be liquidated.

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