Futures/margin/leverage Flashcards
What is margin trading
Trading an asset with leverage on the spot market
10x isolated
3x cross
Trading fee repayment
Margin orders are spot orders
Interest rates in the loan are calculated by the hour and paid by the day- about 1% plus higher buy and sell fees
Lots of different pairs you can long and short and trade with more money than you have
What is futures trading
Derivatives trade contracts with leverage
Up to 125x
Uses maintenance margin as Collateral so no repayment.
What are derivatives?
Profit from speculating in the value of the underlying asset in the future
Cryptocurrency becoming an asset class
Derivatives derive their value from an underlying asset. Speculate and hedge on the price in the future.
Derivatives market a lot bigger than underlying market .
Usually the price of another underlying financial asset.
Control cash flow and don’t have to own the underlying asset
Forwards- settled at the end of the contract.
Futures - like an option but you have to commit to the buy or sell. Trading of a set asset at a set price in the future. Prices traded daily.
Options - call option the ability to buy a commodity at a certain price on or before a certain date.
Put - an option to sell at a price in the future
Call- option to buy at a set date at set price
Swaps- an exchange of one security for another at a future date.
Hedging - price fluctuates throughout year. Sell or buy futures contracts
What is cross margin and isolated margin modes
Cross margin easier and faster but if you don’t manage your risk and get liquidated all your positions will get liquidated.
Isolated margin can give you more leverage and more pairs
Isolated margin your risk is isolated and position is automatically closed if it’s going against you so you need a stop loss so you don’t get closed out and liquidated.
Risk is isolated in each isolated account and does not affect others
Can only open one cross margin account and all positions risk is shared
What is perpetual and quarterly futures
Perpetual contract doesn’t have an expiry
Quarterly - eg BTC0925 will expire 3 months after issue last day of trading 25th September
Rollovers to avoid costs and obligations associated with settlement of contracts.
Quarterly contracts to not carry a funding fee
Fundings fees can increase as the price rallies
What is impermanent loss
When the price of your tokens changes compared to when you deposited them in the pool.
Liquidity pools enable anyone to earn trading fees
What determines the price of the assets in the pool is the ratio between them in the pool.
And you can only draw out the percentage that you put in
Binance USDT M futures
COIN M futures
COIN M futures are funded with the cryptocurrency and P & L is calculated in respective cryptocurrency instead of usdt
Defi derivatives
Meh
