Crypto margin and collateral: reconcile account exposure

Work through inverse P&L, shared-equity stress, conditional collateral deposits, maintenance deductions and marginal collateral bands.

Course outline

1. 1

   Inverse futures P&L: calculate profit and collateral value

   Calculate coin-settled inverse futures P&L and account value in USD. Separate contract profit from the changing dollar value of the collateral you already hold.

   8 min

   In short: Inverse futures coin P&L is D × (1/E − 1/P) BTC, where D is the USD face amount. Equity is C + coin P&L, and its USD change splits into contract P&L valued at P plus collateral revaluation C × (P − E): at 50,000, a 60,000 long with 0.10 BTC collateral loses 2,000 USD.

2. 2

   Cross margin risk: stress several positions together

   Calculate joint position losses, maintenance margin and remaining equity in one cross-margin stress. Never let two positions spend the same shared collateral.

   7 min

   In short: Cross-margin positions share one equity, so stress them in the same scenario: equity after all losses minus all maintenance requirements at that observation. With 1,000 USD, losses of 550 and 260 and requirements of 130 and 90 leave 190 against 220, a shortfall of 30.

3. 3

   Margin top-up: calculate eligible collateral after haircuts

   Sending 85 in market value does not add 85 to recognised collateral. Calculate the top-up a shortfall needs after eligibility, haircuts and price changes.

   7 min

   In short: Collateral credit is quantity × price × credit factor, not market value. With X at 2 USD and a 0.80 factor, each unit credits 1.60, so an 85 credit needs 85 ÷ 1.60 = 53.125 X, rounded up to 53.2 X; 42.5 X has 85 of market value but credits 68.

4. 4

   Maintenance margin tiers: apply the rate and deduction

   Reconcile a tiered maintenance-margin schedule with its rate-minus-deduction formula. Test a tier boundary without inventing a sudden margin cliff.

   7 min

   In short: In a marginal tier schedule, the higher maintenance rate applies only to notional above the tier boundary. With 1% up to 10,000 and 2% above, maintenance = 0.02N − 100 for 10,000 < N ≤ 20,000, so 10,100 requires 102, not 202.

5. 5

   Collateral haircuts: calculate tiered credit and liabilities

   Calculate recognised collateral across marginal tiers, then subtract liabilities. Separate market value from collateral credit and ineligible balances.

   7 min

   In short: With marginal haircut bands, each slice gets its own credit factor: 12 Y at 100 USD credit 450 + 400 + 100 = 950 USD against 1,200 of market value. Liabilities are subtracted under their own rule, so a 200 USD liability leaves 750, not 850.

Open full-size diagram

1. Inverse futures P&L: calculate profit and collateral value
2. Cross margin risk: stress several positions together
3. Margin top-up: calculate eligible collateral after haircuts
4. Maintenance margin tiers: apply the rate and deduction
5. Collateral haircuts: calculate tiered credit and liabilities

Educational material. Examples do not establish a profitable strategy. Trading costs, gaps and liquidation can produce losses beyond a planned stop.