Margin

Margin is the amount of collateral required to open and maintain a position in a leveraged trading environment. In derp.trade, margin is used to determine the maximum leverage that can be applied to a position, as well as the minimum amount of collateral required to keep the position open.

Only cross-margin is supported in derp.trade. This means that all positions share the same margin, and the margin is used to cover all positions. This is different from isolated margin, where each position has its own margin and can be liquidated independently.

Leverage

Maximum leverage is dependent on the market. The maximum leverage for each market is between 3x and 40x, and is set by the protocol depending on the liquidity and AMM skew.

When opening a position, the user can choose any leverage between 1x and the maximum leverage for that market. The higher the leverage, the more margin is required to open the position.

Initial and maintenance margin

The account value of a user is the sum of all their cash and unrealized PnL.

To open a position, the user's account value must be greater than the initial margin calculated by:

initial margin = position size * price / leverage

After opening a position, the account value must be greater than the maintenance margin to prevent liquidation. The maintenance margin is calculated as:

maintenance margin = position size * price / (max leverage * 2)