Trading coin-margined futures contracts in cryptocurrency presents unique challenges. Since the Profit and Loss (PNL) is affected by the fluctuating value of the underlying digital asset, it often feels counterintuitive. This guide explores how to convert positions and profits between coin-margined (BTC) and USD-margined (fiat) systems, helping traders better understand their exposure.
Understanding the Equivalent of Crypto Futures Contracts
Let's assume BTC/USD is priced at $10,000. If you open a long position on OKEx for one BTCUSD contract with a $100 face value and close it at $20,000, the profit calculation (excluding funding rates and fees) would be:
| Calculation | Result |
|---|---|
Closing PNL = Contract Face Value * (1/Entry Price - 1/Exit Price) BTC | 100 * (1/10,000 - 1/20,000) BTC = 0.005 BTC ($100) |
Alternative Scenario:
If you borrowed $100 at 0% interest, bought 0.01 BTC at $10,000, and sold it at $20,000, the profit would also be $100. This demonstrates that holding a 0.01 BTC + $100 loan portfolio replicates the PNL of a BTCUSD futures contract.
General Formula:
For any entry price (_open_) and exit price (_close_):
| Futures PNL | Equivalent Spot + Loan PNL |
|---|---|
100 * (1/open - 1/close) BTC | 100 * (close/open - 1) USD |
This equivalence allows us to "synthesize" futures contracts using spot holdings and loans—a foundational concept in financial engineering.
USD-Equivalent Position Calculation for Coin-Margined Contracts
Example:
- Current BTC price: $10,000
- Contract face value: $100
- Margin: 0.01 BTC
- Position: Short 5 BTCUSD contracts
Decomposing the contracts into their equivalent spot/loan components:
| Balance Sheet | Asset | Liability | Equity |
|---|---|---|---|
| BTC | 0.01 | 0.05 | -0.04 |
| USD | 500 | 0 | 500 |
Key Insights:
- The USD-equivalent short exposure is 0.04 BTC (this is coin-margined futures' inherent leverage).
- Equity = $500 - 0.04 BTC (convertible to BTC terms at current prices).
General Cases:
Long m Contracts:
- BTC Exposure:
n + m*100/p - USD Debt:
m*100
- BTC Exposure:
Short m Contracts:
- BTC Exposure:
n - m*100/p - USD Credit:
m*100
- BTC Exposure:
Hedging Example:
If n = m*100/p (short position equals margin value in USD), equity becomes m*100 USD—immune to BTC price changes ("delta-neutral").
FAQs
Q1: Why does coin-margined PNL feel counterintuitive?
A: Because profits are calculated in BTC terms but often mentally converted to USD, creating dissonance when BTC price moves.
Q2: How does leverage work in coin-margined contracts?
A: A short position automatically creates USD exposure proportional to BTC price movements, acting like implicit leverage.
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Q3: When should I use coin-margined vs. USD-margined contracts?
A: Coin-margined suits those holding crypto long-term; USD-margined simplifies PNL calculation for traders focused on fiat profits.
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Conclusion
By breaking down futures positions into their spot/loan components, traders can:
- Accurately assess USD/BTC exposures.
- Implement hedging strategies.
- Simplify cross-margin accounting.
This framework eliminates confusion, letting you focus on strategic decisions in volatile crypto markets.
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