Contents of this article

What are USDT Margined futures contacts?

What are USDT Margined (Collateralized) perpetual contracts?

How to trade USDT Margined Perpetual Futures on XT.COM

What are USDT Margined futures contacts?

USDT Margined futures contracts are a type of financial instrument that allow traders to buy and sell commodities, equities, or other assets using USDT as collateral. These contracts give traders the ability to take positions in volatile markets while maintaining minimal exposure to risk, since they can liquidate their contract at any time by redeeming their USDT collateral. Additionally, many exchanges like XT.COM futures offer margin trading for USDT Margined futures contracts, allowing investors to leverage their capital and increase their potential returns. This means that investors can leverage their capital by borrowing additional funds from the exchange based on the value of their initial position. While this can lead to higher returns, it also increases the risk of losses if the market moves against their position. Overall, USDT Margined futures contracts are a valuable tool for traders and speculators looking to participate in the fast-paced world of financial markets. Whether you are looking to take short positions or make long-term investments, these contracts can help you achieve your trading goals by allowing you to trade with minimal capital and take advantage of changing market conditions.

Characteristics of USDT-margined Contracts 

USDT-margined futures contracts are more suitable for risk hedging and arbitrage. Due to the fact that there is no borrowing and lending of funds, the participants do not need to pay interest on their positions, so that they can benefit from a higher trading margin rate. Compared with other traditional products, USDT-margined futures contracts are less risky and more efficient. Furthermore, USDT-margined futures contracts enable investors to take either long or short positions, offering them a much wider range of choices.

Profit in USDT and know exactly what you’ll make! USDT-margined contracts take the guesswork out of cryptocurrency trading. By using a stablecoin pegged to the US dollar, traders can easily estimate their returns – no more having to convert BTC into fiat or being unsure of what that 500 was worth at conversion time. With these linear futures products, making profits simply means standing by as your account balance steadily increases in real U.S dollars – just like folding money!

Mechanism for USDT-margined Contract

USDT-margined contracts implement price-time-priority algorithm, the earliest active buy order at the highest price takes priority over any subsequent order at that price, which in turn takes priority over any active buy order at a lower price. When the margin ratio is equal to or less than 0, liquidation will be triggered for the position.

The formulas are as below:

Isolated Margin Ratio = Account Equity / Occupied Margin * 100% – Adjustment Factor;

Cross Margin Ratio = Account Equity / ∑All Contracts in the Cross Margin Account (Occupied Margin * Adjustment Factor）– 100%

What are USDT Margined (Collateralized) perpetual contracts?

USDT Margined (Collateralized) perpetual futures contracts are a new type of investment instrument, which enable traders to speculate on the value of cryptocurrencies. This type of contract allows traders to effectively ‘borrow’ USDT from the underlying exchange in order to leverage their trades, with the USDT collateral being held as security for any potential losses or gains that may arise from opening and closing these positions. The contract has no expiration date and is designed to closely track the spot price of the underlying asset via Funding mechanism. This perpetual structure provides perpetual liquidity, meaning there is no need to roll over trades or wait for the expiration of existing contracts. While it is certainly a risky venture due to its high-leverage nature, USDT margined perpetual futures contracts are attractive to experienced traders who want more control over their investments and exposure through more precise risk management strategies.

Take USDT Collateralized BTC Perpetual Contract as an example, a trader longs 1,000 contracts at a price of 10,000 USDT, and the value of a contract is 0.001 BTC. Equivalently, they are longing 1,000 * 0.001 = 1 BTC. P&L Calculation equals to No. of Contracts * Multiplier * (Exit Price – Entry Price). After several days, the price rises to 12,000 USDT, so trader earn a profit of 1,000 * 0.001 * (12,000 – 10,000) = 2,000 USDT. On the contrary, a trader who is shorting the same amounts of contracts will lose 2,000 USDT during this time. (Fees are not included)

Terminology

• P&L

P&L stands for Profit & Loss. All USDT collateralized contracts use USDT to calculate PnL. The Profit and Loss (PnL) is calculated as {future exit price- future entry price} x position size/future entry price. When calculate the PnL of XT.COM Futures USDT Margined futures contacts, traders need to consider three aspects: the expenditure of service fees, the income or expenditure of funding fees, and the profit and loss of closing positions. Click here to check more details.

• Leverage and Margin

Leverage in these contracts allows traders to open a larger position than their capital would normally allow by trading with borrowed funds. Leverage is an extremely powerful tool that can be used to increase both gains and losses when trading perpetual futures contracts. Leverage also impacts the amount of margin required to open a position since higher leverage equates to a lower initial margin requirement. Leverage is therefore a critical factor for traders looking at perpetual futures contracts and should be carefully considered if utilizing this type of contract.

Margin refers to the difference in margin requirements between margin deposits and margin calls. Margin deposits are the funds placed into an account for margin purposes, whereas margin calls require additional funds due to market changes or potential losses. Thus, margin establishes the amount of money required to have reasonable protection from adverse price movements and to from losses in a perpetual futures contract. This helps maintain stability in the markets and enables traders to enter positions with reasonable certainty that their margin requirements will not be detrimental if prices move against them.

• Liquidation

Liquidation in a perpetual futures contract is when a trader’s account balance falls to an amount that doesn’t meet the maintenance margin. This happens when the losses that are associated with their open trades surpass the available margin in their trading account. Liquidation acts as a mechanism to ensure that traders continually maintain sufficient funds in their trading accounts to honor the risk associated with their open positions. Liquidation also helps traders avoid unfavorable pricing caused by illiquid markets or manipulation of prices. Liquidation limits the potential losses of a trader while providing safe and secure markets for everyone involved.

• Market Price, Mark Price and the Index Price

Market Price: Market Price is the current fair value of an underlying asset including its basis spread, funding rate, and insurance fund factor. Market Price will constantly adjust through the day from trades being executed with buyers and sellers. Market Price is used to set the amount of margin required to maintain a position in perpetual futures contract as well as when a user wishes to open a new position. Market Price plays an important role in dictating how much margin a trader or investor needs to maintain their positions on the exchange based upon their financial goals and strategies.

Mark Price: Mark Price is typically set equal to the underlying index price and acts as a reference point when executing trades and calculating margin requirements. Mark Price also serves as the starting point for Mark-to-Market calculations in which gains and losses resulting from changes in price are automatically settled within a futures contract. Mark Price allows traders of perpetual futures contracts to be able to enter and exit their positions with greater certainty that their differences will be calculated accurately and reliably.

Index Price: Index Price refers to the current market price of a perpetual futures contract. Index prices are determined by taking the average of all bids and offers in that particular contract. Index Price is an important factor regarding calculating your margin requirement when trading perpetual futures contracts, as it allows you to calculate how much money you need to set aside in order to cover potential losses on any open positions you have. If Index Price drops, then so does your margin requirement, whereas if Index Price increases, then so does your margin requirement. It is critical for traders to stay up to date with Index Price in order to adjust their strategy accordingly and remain profitable. Check XT.COM Futures index price here.

• Isolated Margin and Cross Margin

Isolated Margin: Isolated Margin is a type of margin offered with perpetual futures contracts. This type of margin allows traders to manage their risk in a more efficient way by allowing only part of their position to be automatically liquidated if there is a significant price movement. Isolated Margin also provides traders plenty of liquidity while they maintain open positions, allowing them to make more strategic decisions when the markets move quickly.

Cross Margin: Cross Margin is an optional margin mode that reduces the margin requirement for traders, allowing them to take on larger positions without having to deposit extra funds into their account. Cross Margin works by allowing traders to spread their total account collateral over all of the positions held in the same contract. Therefore, Cross Margin ensures that traders have adequate margin levels across all positions in a particular contract and can allow them to increase their position size if desired.

• Perpetual Funding Rates

Funding Rates in perpetual futures contract margin is a payment that occurs between Funding Pairs. Its purpose is to encourage both Funding Providers and Funding Receivers to maintain equality between the long and short sides of the contract. Funding Rates also provide an incentive for Funding Providers by encouraging them to hold positions at, or nearer to, the Funding Target Price. A Funding Provider is anyone who is long on the contract and a Funding Receiver is anyone who is short on the contract. Funding Rates are calculated in accordance with the Spot Index Price and Fair Price Mark, payable in USDT tokens. Whenever Funding Rate occurs, all positions held within that particular perpetual futures contract will be affected, warranting frequent monitoring from involved parties. Check XT.COM Futures funding rates here.

• Risk Protection Fund

Risk Protection Fund is a mandatory fund in perpetual futures contracts which ensures that there’s always margin available to serve as collateral. Spin-off products, such as swap futures and options, also use Risk Protection Funds to back up the customer accounts in order to cover any losses over and above their own contribution. The Risk Protection Fund helps protect traders against any market force or technical issues that can cause instant liquidation of their positions due to insufficient margin. Visiting traders are only required to pay a small expense ratio instead of upfront payments, allowing them more freedom to explore new opportunities and take greater risks knowing the Risk Protection Fund has them covered. Check XT.COM Futures risk protection fund here.

How to trade USDT Margined Perpetual Futures on XT.COM

Welcome to our tutorial on how to trade USDT-M perpetual futures contracts.

1. Register an account or log in to XT.COM

2. Click Derivatives on the navigation bar and tap “USDT-M Futures” to enter into the trading page.

3. To begin trading, choose an asset from the left panel. For example: Selecting BTC/USDT Perpetual.

4. Then, based on your judgement, choose “Open Long” or “Open Short”. You can place a bet on the future direction of the market by buying or selling contracts. A long position means you expect the market to rise, while a short position means you expect it to fall.

5. If we place a limit order, there will be three different types of limit orders that we can place: GTC, IOC, and FOK.

6. After choosing an order type, select the margin mode, unit, and leverage for trading. You can use “BTC” or “USDT” as a unit to calculate trading cost and profits.

7. Enter the price, amount, and click “Open Long” to place the order.

8. As soon as you place your order, click on “Filled Positions” to check whether it has been filled or not. The orders that have been completed will be listed under “Current Positions”, while the ones that haven’t been filled yet will be shown under “Open Orders”.

9. If you want to close a position, you can choose an order type, enter the price and amount, and choose a leverage to close the position.

About XT.COM

Founded in 2018, XT.COM now serves nearly 8 million registered users, over 1,000,000+ monthly active users and 40+ million users in the ecosystem. Our comprehensive trading platform supports 800+ high-quality tokens and 1000+ trading pairs. XT.COM crypto exchange supports a rich variety of trading, such as spot trading, margin trading, and futures trading together with an aggregated NFT marketplace. Our platform strives to cater to our large user base by providing a secure, trusted and intuitive trading experience.