When Collateral Moves Too
Let’s imagine that the TradFi Perp on the share price hasn’t changed much, but the margin buffer still shrank. This can happen if the position is collateralized not by USDT, but by a volatile crypto asset.
Binance notes that TradFi Perps support the Multi-Assets Mode. In particular, BTC and other supported assets can be used as margin, but applicable discount coefficients are applied to them.
In such a position, two quantities move at the same time:
• the price of the TradFi contract itself;
• the value of the asset that supports the margin.
If the contract moves in the right direction, while the collateral suddenly becomes cheaper, the outcome may be weaker than a single chart suggests. If both move against the position, pressure on the margin increases.
That’s why, for me, the position screen doesn’t start with leverage. First, you need to see exactly what it’s collateralized with and what haircut is applied.
One trade can include two market risks even before funding and fees.
#TradFi
Let’s imagine that the TradFi Perp on the share price hasn’t changed much, but the margin buffer still shrank. This can happen if the position is collateralized not by USDT, but by a volatile crypto asset.
Binance notes that TradFi Perps support the Multi-Assets Mode. In particular, BTC and other supported assets can be used as margin, but applicable discount coefficients are applied to them.
In such a position, two quantities move at the same time:
• the price of the TradFi contract itself;
• the value of the asset that supports the margin.
If the contract moves in the right direction, while the collateral suddenly becomes cheaper, the outcome may be weaker than a single chart suggests. If both move against the position, pressure on the margin increases.
That’s why, for me, the position screen doesn’t start with leverage. First, you need to see exactly what it’s collateralized with and what haircut is applied.
One trade can include two market risks even before funding and fees.
#TradFi