Last updated: 6 November 2024
In compliance with MiCA requirements, unauthorized stablecoins are subject to certain restrictions for EEA users. For more information, please click here.
Before opening a position, traders must ensure that they have a sufficient amount of funds in their wallet balance. The cost required to open a position includes the initial margin and open losses (if applicable). Open losses occur when the price of a futures contract goes unfavorably (e.g., the mark price is lower than the order price for a long order). Binance includes open losses as part of the cost required to open a position to prevent forced liquidation when traders place an order. If open losses are not accounted for, there is a high risk that the position will be liquidated immediately after the order is placed.
The formula to calculate the cost required to open a position is:
Cost = Initial Margin + Open Loss (if any)
1. Cost required to open a limit or stop order
Step 1: Calculate the initial margin
Initial Margin = Notional Value / Leverage
= (9,253.30 * 1 BTC) / 20
= 462.66
Step 2: Calculate the open loss
Open Loss = Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Order Price)]}
Direction of Order: 1 for long order；-1 for short order
(i) Open Loss of a Long Order
= Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Order Price)]}
= 1 * Absolute Value {min[0, 1 * (9,259.84 - 9,253.30)]}
= 1 * Absolute Value {min[0, 6.54]}
= 1 * 0
= 0
There is no open loss when the user opens a long order.
(ii) Open loss of a short order
= Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Order Price)]}
= 1 * Absolute Value {min[0, -1 * (9,259.84 - 9,253.30)]}
= 1 * Absolute Value {min[0, -6.54]}
= 1 * 6.54
= 6.54
There is an open loss when the user opens a short order.
Step 3: Calculate the cost required to open a position
Since the long order has no open loss, the cost required to open a long position is equivalent to the initial margin.
(i) Cost required to open a long position
= 462.66 + 0
= 462.66
Since the short order has an open loss, the cost required to open a short position is higher, as the open loss must be taken into consideration in addition to the initial margin.
(ii) Cost required to open a short position
= 462.66 + 6.54
= 469.20 (rounding difference)
2. Cost required to open a market order
Step 1: Calculate the assuming price
Long Order: Assuming Price = Last Price * (1 + 0.1%)
Short Order: Assuming Price = Last Price * (1 + 0.1%)
(i) Assuming price of a long order
= Last Price * (1 + 0.1%)
= 10,461.78 * (1 + 0.1%)
= 10,472.24
(ii) Assuming price of a short order
= Last Price * (1 + 0.10%)
= 10,472.24
Step 2: Calculate the initial margin
Initial Margin = Notional Value / Leverage
(i) Initial margin of a long order
= Assuming Price * Number of Contract / Leverage
= 10,472.24 * 0.2 / 20
= 104.7224
(ii) Initial margin of a short order
= Assuming Price * Number of Contract / Leverage
= 10,472.24 * 0.2 / 20
= 104.7224
Step 3: Calculate the open loss
Open Loss = Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Order Price)]}
Direction of order: 1 for long order；-1 for short order
(i) Open loss of a long order
= Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Assuming Price)]}
= 0.2 * Absolute Value {min[0, 1 * (10,461.83 - 10,472.24)]}
= 0.2 * Absolute Value {min[0, -10.41]}
= 0.2 * 10.41
= 2.082
There is an open loss when the user opens a long order.
(ii) Open loss of a short order
= Number of Contract * Absolute Value {min[0, Direction of Order * (Mark Price - Assuming Price)]}
= 0.2 * Absolute Value {min[0, -1 * (10,461.83 - 10,472.24)]}
= 0.2 * Absolute Value {min[0, 10.41]}
= 0.2 * 0
= 0
There is a small open loss when the user opens a short order.
Step 4: Calculate the cost required to open a position
For a long order, since there is an open loss, the cost required to open a long position is higher because the open loss must be taken into consideration in addition to the initial margin.
(i) Cost required to open a long position
= 104.6701089 + 2.082
= 106.75 (rounding difference)
Since the short order has an open loss, the cost required to open a short position is slightly higher
(ii) Cost required to open a short position
= 104.6178 + 0
= 104.6178 (due to the update of assuming price calculation logic)
For more information regarding USDⓈ-M Futures Contracts, please refer to: