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Cost Required to Open a Position

Traders should ensure that they have a minimum fund in their wallet balance before opening a position. The cost required to open a position includes the initial margin and open loss (if any). Open loss occurs when the order price is unfavorable to the traders i.e. mark price is lower than the order price for a long order.

Finandy includes open loss as one of the costs required to open a position to avoid forced liquidation when the traders place the order. If the open loss is not included as one of the cost required to open a position, there is a high probability that users’ position will get liquidated immediately once they have placed such order.

Cost = Initial Margin + Open Loss (if any)

Initial Margin = Notional Value / Leverage = (9,253.30 x 1 BTC) / 20 = 462.66

Open Loss = Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]} *direction of order: 1 for long order；-1 for short order

Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]} = 1 x Absolute Value {min[0, 1 x (9,259.84 - 9,253.30)]} = 1 x Absolute Value {min[0, 6.54]} = 1 x 0 = 0 There is no open loss when the user opens a long order.

= Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]} = 1 x Absolute Value {min[0, -1 x (9,259.84 - 9,253.30)]} = 1 x Absolute Value {min[0, -6.54]} = 1 x 6.54 = 6.54 There is an open loss when the user opens a short order.

Since the long order has no open loss, thus the cost required to open a long position is equivalent to the initial margin.

= 462.66 + 0 = 462.66 Short order has an open loss, thus the cost required to open a short position is higher as we need to take open loss into consideration besides the initial margin.

= 462.66 + 6.54 = 469.20 (rounding difference)

Long order: assuming price = ask[0] * (1 + 0.05%) , Open order: assuming price = max(bid[0], mark price)

= ask[0] * (1 + 0.05%) =10461.77 * (1 + 0.05%) = 10467.0009

= max(bid[0], mark price) = max (10461.78, 10461.78) = 10461.78 *[0]：Level 1 price

Initial Margin = Notional Value / Leverage

= Assuming price of long order * Number of Contract / Leverage = 10467.0009 * 0.2 / 20 = 104.670009

= Assuming price of short order * Number of Contract / Leverage = 10461.78 * 0.2 / 20 = 104.6178

Open Loss

= Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]}

*direction of order: 1 for long order；-1 for short order

= Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]} = 0.2 x Absolute Value {min[0, 1 x (10461.78 - 10467.0009)]} = 0.2 x Absolute Value {min[0, -5.2309]} = 0.2 x 5.2309 = 1.04418

There is an open loss when the user opens a long order.

= Number of Contract x Absolute Value {min[0, direction of order x (mark price - order price)]} = 0.2 x Absolute Value {min[0, -1 x (10461.78 - 10461.78)]} = 0.2 x Absolute Value {min[0, 0]} = 0.2 x 0 = 0

There is no open loss when the user opens a short order.

Long order has an open loss, thus the cost required to open a long position is higher as we need to take open loss into consideration besides the initial margin.

= 104.670109 + 1.04418 = 105.71 (rounding difference)

Since the short order has no open loss, thus the cost required to open a short position is equivalent to the initial margin.

= 104.6178 + 0 = 104.61 (rounding difference)

Last modified 9mo ago

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Contents

Cost Required to Open a LIMIT or STOP order

Step 1: Calculate the initial margin

Step 2: Calculate Open Loss

Step 3: Calculate the cost required to open a position

Cost Required to Open a MARKET order

Step 1: Calculate assuming price

Step 2: Calculate the initial margin

Step 3: Calculate Open Loss

Step 4: Calculate the cost required to open a position