Margin

Margin ratio and PnL

There are two different margin ratios to keep track of.

• Initial Margin Ratio

• Maintenance Margin Ratio

Initial Margin Ratio

The initial margin ratio is the ratio of margin required to increase a position or open a position. If an account doesn't have enough initial margin ratio, the trader won't be able to open a new position. The initial margin ratio is set to 10%. This means that an account needs to have at least 10% of free margin to open a position. The initial margin ratio can be calculated by

$$IMR=\frac 1 {Maximum Leverage}$$

For maximum leverage of 10x, the initial margin ratio calculated is 1/10=10%.

Maintenance Margin Ratio

The maintenance margin ratio is the required margin ratio below which an account could be liquidated. This helps stop the spread of losses from a bad trade. By default, the maintenance margin ratio in PerpDEX is set to 5%. This means if an account has a leverage of 1/5%=20x, the account will be liquidated by the liquidator.

Account Margin Ratio

The account margin ratio is the current margin ratio of accounts across all positions in all markets. This margin ratio is compared to the base initial margin ratio when opening a position and the maintenance margin ratio upon which liquidation mechanism triggers. The account margin ratio is calculated as

$$Margin Ratio = \frac {TotalAccountValue} {TotalPositionNotional}$$

​Where total account value is defined as

$$Total Account Value=Collateral + Unrealized PnL$$

​and total position notional is defined as

$$Total Position Notional= \sum|PositionNotional| \ \ \ across \ all \ positions$$