What is Derivatives Trading
A derivative is a financial product whose value is derived from an underlying asset.
Derivatives Trading enables traders to speculate on the future price of an asset by purchasing or selling derivative contracts to earn a bigger return than if they purchased the underlying asset outright.
Trading in derivatives on Bitfinex is only available to Intermediate, and higher-level verified users in approved eligible jurisdictions.
Important: To trade derivatives, you must hold Bitcoin (BTC), Tether USDt Token (USDt), or Tether EURt Token (EURt) in your Derivatives wallet.
To learn how to transfer funds to your Derivatives wallet, please visit How to move funds to the Derivatives wallet.
How to open a short position in Derivatives Trading
1. Firstly, go to the Derivatives page > Select the desired pair.
For example, BTC-PERP.
2. Next, in the Order Form, create a Derivative Sell order by indicating the order type, price, and amount.
3. Then, by dragging the slider or typing a number into the leverage box, select the leverage you wish to trade with. The leverage will determine the amount of allocated collateral.
Note: The maximum leverage for derivatives trading is up to 100x, depending on the derivative pair.
4. Finally, to place your order click Derivative Sell.
How to close a short position in Derivatives Trading
To close the position, you can:
- Use the Close button to initiate a Market Derivative Buy order, which will result in the closure of the short position; or
- Place a Derivative Buy order for the same amount of BTC as your short position.
How to open a long position on Derivatives Trading
To open a leveraged long position, follow the same steps above, but this time select Derivative Buy.
How to close a long position in Derivatives Trading
To close your position, you may:
- Use the Close button to trigger a Market Derivative Sell order, which will close your long position; or
- You can place a Derivative Sell order of the same amount of BTC as your long position.
What currency can be held as collateral
Collateral is the USDt, EURt or BTC in your Derivatives wallet that serves as security for the position.
The USDt, EURt or BTC collateral allocated to a position must be at least 1% of the USDt, EURt or BTC notional value of the position you seek to open.
For example: If you have 100 USDt in your derivative wallet, you can use it as collateral to open positions with a leverage of up to 1:100. Margin positions with a USDt value of up to 10,000 USDt, for example.
Funding payments and trading fees will be debited from the collateral allocated to an active position if there are not enough funds in the derivatives wallet, which, as a result, will lower your collateral level. While the minimum maintenance margin is 0.5% according to our Derivative Fee and Margin Schedule, failure to maintain a collateral level above the maintenance margin (i.e. collateral allocated divided by position value, disregarding unrealized profits) will result in liquidation. In the event of a liquidation, you will forfeit your collateral as well as your profit in that position.
In contrast to our asset margin trading platform, our derivatives platform uses isolated margining, which means that you can commit a specified amount of collateral to a position rather than using all of the funds in the wallet to cover all active positions in the account.
Note: As a result of slippage, losses from manually executed trades can still be more than the allocated collateral.
For example: Let’s say you have 1000 USDt and you want to open two positions.
The price of BTC is $8000. You can open positions with a total value of up to 100,000 USDt (1000x100).
The first position you open is a long 1.25 BTC/USDt worth 10,000 USDt, and you choose 20x leverage for that position. This allocates 500 USDt as collateral.
You now have 500 USDt available in your derivatives wallet. The price of ETH is $400. You decide to open another long for 40 ETH/USDt worth 16,000 USDt, using 80x leverage. This allocates 200 USDt as collateral, leaving 300 USDt available in your derivatives wallet.
Relevant links
To learn more about Derivatives Trading, please visit the following links:
- The Terms of Service for Derivatives can be found here:
https://www.bitfinex.com/legal/derivative/terms. - Description of Derivative Products for various pairs:
https://www.bitfinex.com/legal/derivative/product. - Please refer to our article on the Liquidation Policy as our Initial Equity and Notional Value requirements change according to the size of the position:
https://www.bitfinex.com/legal/derivative/fee. - Here's where you can discover more about the Funding Payment Summary:
https://www.bitfinex.com/legal/derivative/funding. - Derivatives Risk Disclosure Statement for Derivative Products:
https://www.bitfinex.com/legal/derivative/risk.
If you have any questions about Derivatives trading, feel free to contact Bitfinex Support for assistance.
