BSX Cross Margin

Make your money work for you leveraging BSXs cross margin system

By default, BSX is cross-margined to give traders maximum capital efficiency and make their winning positions work for them. Everything on BSX will work towards a trader's collateral. This is different from an isolated margin, where the margin is segregated to one position, increasing the margin requirements and reducing the capital efficiency of a trader's portfolio.

Right now, if you want to trade on an isolated margin you will have to use different wallet addresses but this is a feature that BSX will implement soon through sub-accounts, giving traders the ability to run different trading strategies through one wallet address.

Understanding Cross Margining

By defaulting to Cross Margin BSX can offer a capital-efficient and more complete trading product to traders. In BSX’s risk and margining system, a trader's PnL is shared along with the USDC balance they hold to contribute to a trader's margin, allowing them to trade more with less. Again, this means everything in your BSX trading portfolio gives you as a trader enhanced protection against liquidations and more leverage to take on. BSX can accomplish this through continuous risk monitoring and management where the BSX risk engine transfers margin between a trader's open positions and a trader only has to worry about their liquidation risk (a metric to measure the portfolio’s risk to liquidation).

To understand this let’s do an example, let’s say a trader has two positions open:

  • Leveraged ETH Trade

  • Leveraged SOL Trade

The trader's Leveraged ETH position sees strong gains and the trader has a high unrealized PnL in this market. However, the price of SOL falls and the trader is losing money. In an isolated margin scenario, the trader could be liquidated on their SOL position but since they have a winning ETH position, the positive unrealized PnL from the ETH position is transferred to serve as collateral on the SOL position. This transferring of collateral across multiple positions enables a trader to take more risk with fewer funds and also lowers a trader's liquidation chances.

Trading with Cross Margin

BSX makes trading and managing your portfolio easy when trading with cross margin so you as a trader can see the information you need to easily asses your risk in the market and focus on making more trades. BSX uses different metrics to assess risk and these form your Liquidation Risk which is an easy metric traders can look at to see how their portfolio is doing. Liquidation Risk looks at how close your Account Equity is to your Portfolio Maintenance Margin. As a trader, you should be aware of the following metrics that make up your risk profile:

  • Account Equity: This is the total value of your account and includes the unrealized PnL of your open positions.

  • Portfolio Initial Margin: This is the total amount of margin that is being used for the positions you have.

  • Free Collateral: This is the total amount of collateral you have left to place on positions you want to open in the future.

  • Portfolio Maintenance Margin: This is the total amount of collateral you need to have to keep your account from liquidating. Essentially, if your account equity drops at or below your portfolio maintenance margin you will be liquidated. Note, margin for both market orders and limit orders are accounted for when calculating Portfolio Maintenance Margin

  • Liquidation Risk: This is how close to liquidation risk you are and is calculated by:

    • Portfolio Maintenance Margin / Account Equity: As your liquidation risk moves toward 1 or 100%, the higher your chance of liquidation, and once your liquidation risk is at or above 1 or 100%, your account will be liquidated

Note: Margin for both market orders and limit orders are accounted for when calculating Portfolio Maintenance Margin and Portfolio Initial Margin

Now how do these all work together? So let’s walk through an example. Let’s say a trader opens up a new account and deposits $5,000 USDC into their account. Now in their account, they would have the following:

  • Account Equity: $5,000

  • Free Collateral: $5,000

  • Portfolio Initial Margin: $0

  • Portfolio Maintenance Margin: $0

  • Liquidation Risk: 0%

The trader longs the 10x BTC perp and in the process takes on 2 times the total of his Account Equity meaning that he is taking a $10,000 notional position in the market. The trader here has to place $1,000 as their initial margin (initial margin is calculated by taking 1/max leverage of the market multiplied by the total notional amount). Now the trader account would look like the following:

  • Account Equity: $5,000

  • Free Collateral: $4,000

  • Portfolio Initial Margin: $1,000

  • Portfolio Maintenance Margin: $666

  • Liquidation Risk: 13%

Based on how the position the trader has taken performs, their Account Equity will change positively or negatively.

The way BSX determines the amount of initial margin and maintenance margin is based on the specific market max leverage amount. In our above example, the max leverage is 10x in the BTC market meaning that a trader has to place 10% of the total notional as initial margin (1/10). The trader's maintenance margin is 2/3rds of the initial margin.

Traders need to be aware of their liquidation risk at all times because it is the best relative indicator of how close their account equity is to falling below their portfolio maintenance margin. We encourage traders to constantly monitor their liquidation risk given the volatility in crypto markets.

BSX is focused on giving traders the most capital-efficient trading experience so traders can use every cent in their portfolio to take positions they believe in.

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