Collateral & Cross-Margin Accounts
Introduction
On IntentX, the cross-margin mechanism is fundamental, consolidating liabilities across a user’s trading account to offset margin between positions. This approach means your portfolio effectively serves as collateral for multiple open positions. This greatly increases the capital efficiency of your portfolio and account.
Understanding Collateral
USDC Deposits: Users need to deposit USDC as collateral before initiating trades. This collateral ensures that traders have sufficient funds to cover potential losses.
Credit Valuation Adjustment (CVA): CVA is a penalty applied to either the trader or solver upon liquidation. This penalty is paid to the non-liquidated party and acts an incentive to always balance one's positions as well as provides a form of liquidation insurance.
Understanding Margin Types
Isolated Margin: Limits liability to the initial margin posted for a single position, often used for speculative, volatile positions. It's a popular choice for perpetuals trading on various exchanges.
Cross-Margin: Liabilities from multiple positions are shared across an account, offsetting margins between positions. This method reduces margin requirements by considering the overall portfolio risk, thereby minimizing the risk of single-position liquidations and requiring lower initial margins.
Isolated Margin Example
A trader has $20K USDC on IntentX. They open a BTC perpetual position worth $50K on 10X leverage, using $5K USDC as collateral into an isolated sub-account. If their position is liquidated, only the $5K USDC initial margin in the sub-account is at risk, leaving the remaining $15K USDC in other sub-accounts unaffected.
Cross-Margin Example
A trader has $20K USDC on IntentX. They open a BTC perpetual position worth $50K and an ETH perpetual position worth $30K. With cross-margin, both positions share the $20K USDC as collateral. If their BTC position is underperforming but their ETH position is performing well, the profit from the ETH position can help maintain the required margin level for the BTC position, preventing early liquidation.
Cross-Margin Benefits
Capital Efficiency for the Portfolio: Cross-margin accounts enhance capital efficiency by allowing the entire portfolio to serve as collateral, reducing total margin requirements and enabling more trading activity with the same capital. This approach allows for offsetting profits and losses across different positions, optimizing the use of funds and minimizing the risk of liquidation.
Lower Margin Requirements: Cross-margin accounts usually require lower margin, providing benefits for both sophisticated and retail traders.
Automatic Risk Management: IntentX automatically calculates and transfers margin between open positions to maintain required margin levels, aiding traders during volatile market conditions.
Risk/Reward Optimization: Traders can adjust leverage across positions to suit their risk preferences.
Portfolio Margining: Unrealized profits from one position can offset the margin requirements of another, preventing liquidation.
Account Management Simplified
Unified Interface: IntentX offers a single, user-friendly interface where traders can easily monitor and manage all their open positions, assess their overall risk, and make informed trading decisions.
Real-Time Updates: The platform provides real-time updates on market conditions and portfolio performance, helping traders to respond promptly to market changes.
Automated Calculations: All necessary calculations related to margin requirements and potential profits or losses are automatically performed and displayed, simplifying the trading process for users.
Managing Portfolio Risk
Visual Risk Indicators: IntentX visually displays risk levels associated with your portfolio, providing clear indicators to help you understand when to take action to prevent liquidation.
Dynamic Adjustments: The platform automatically adjusts to market conditions, providing real-time feedback on the risk levels associated with each open position.
Proactive Notifications: Traders receive immediate notifications on the front-end when risk levels increase, allowing for timely intervention to adjust positions or add collateral.
Conclusion
IntentX’s cross-margin account system is designed for efficient and secure trading, offering lower margin requirements, automatic risk management, and simplified account management. With these features, traders can navigate the market confidently while optimizing risk and reward.
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