1. About auto-margin adddition feature
The auto-margin addition feature enables users to add margin automatically upon position closing the liquidation price so as to avoid the risks of liquidation. Once the auto-margin addtion feature is enabled, your balance will added to be margin automatically every time that your position closes to the liquidation price.
The added margin amount will be the amount that recovers your position to the initial margin rate. If the available balance is insufficient, the system will first cancel user's open order to release some margin. Then, the balance will be transferred to be the margin for the position that closes to the liquidation line.
2. The formula for auto-margin addition
(1) USDT-margined contract:
(position margin + added margin each time + floated PnL) / (fair price * amount * face value) = 1/initial leverage's auto-margin-addition amount each time = (fair price * amount * face value) / leverage - floated PnL - position margin
(2) Coin-margined contract:
(position margin + added margin each time + floated PnL) * fair price / (amount * face value) = 1/initial leverage's auto-margin-addition amount each time = (mount * face value) / (leverage * fair price) - floated PnL - position margin
Initial margin rate = 1/ initial leverage
Suppose a user opens 5,000 contr. for BTC_USDT perpetual contract at the price of 18,000 USDT with 10x leverage, and the estimated liquidation price is 16,288.98 USDT and the available balance in his contract account is 1,000 USDT.
If the fair price drop to 16,288.98 USDT, i.e. reaching the liquidation price, the auto-margin addition feature will be enabled to avoid the liquidation risk. According the auto-margin addition formula above, the added margin amount shall be: 764.56 USDT. After the margin addition, the liquidation price will be lowered to 14,758.93 USDT. This avoids the liquidation of the user's position.
If the fair price continues to fall to 14,758.93 USDT, the auto-margin addition feature will be re-enabled. By the time, the available balance of the user is only 235.44 USDT. If the margin addition amount is less than the calculated amount, it will be added normally. If not, all the remaining balance of 235.44 USDT will be added as margin and the liquidation price will be calculated accordingly.
- When closing the liquidation line, the system will first cancel the open orders to release more available margin. Then, it will be transferred to be margin to avoid liquidation.
- Auto-margin addtion feature is only valid for isolated-margin mode. It is not supported under cross-margin mode.