Costs of opening positions
How we calculate the cost of opening a Limit Order
Calculate the initial margin
Initial margin
= Notional Value / Leverage Multiplier
= (102,990.0*1 BTC)/20x
= 5,149.50
Calculate open loss
Open Loss = Number of Contracts × Absolute Value {min [0, Order Direction × (Mark Price — Order Price)]}
Direction of order: 1 for long order; -1 for short order
Open loss of long orders:
= Number of Contract * Absolute Value {min[0, Direction of order * (Mark price — Order Price)]}
= 1 * Absolute Value {min[0, 1 * (102,988.4- 102,990.0)]}
= 1 * Absolute Value {min[0, (-1.6)]}
= 1 * 1.6
= 1.6
Open loss occurs when you place a long order.
Open loss of short orders:
= Number of Contract * Absolute Value {min[0, Direction of order * (Mark Price — Order Price)]}
= 1 * Absolute Value {min[0, -1 * (102,988.4- 102,990.0)]}
= 1 * Absolute Value {min[0, 1.6]}
= 1 * 0
= 0
Open loss does not occur when you place a short order.
Calculate the cost of opening a position
Since there is no open loss when you place a short order, the cost of opening a short order is equal to the initial margin.
Cost of opening a long order:
= 5,149.50+ 1.6
= 5,151.1
Cost of opening a short order
= 5,149.50 + 0
= 5,149.50
Since placing a long order results in an open loss, it requires more margin than a short order. In addition to the initial margin, you must also take into account the open loss.
How we calculate the cost of opening a Market Order
Calculate estimated entry price
Long order estimated entry price = ask[0] * (1 + 0.05%); Short order estimated entry price = max(bid[0], mark price)
Estimated entry price of long orders
= ask[0]*(1 + 0.05%)
= 102,946.8*(1 + 0.05%)
= 102,998.27
*[0]：Level 1 price
Assuming price of short orders
= max(bid[0], mark price)
= max (102,946.9, 102,941.0)
= 102,946.9
*[0]：Level 1 price
Calculate the initial margin
Initial Margin = Notional Value / Leverage Multiplier
Initial margin for long orders
= Estimated entry price of long order * Number of Contracts / Leverage Multiplier
= 102,998.27 * 1 /20
= 5,149.9135
Initial margin for short orders
= Estimated entry price of short order * Number of Contracts / Leverage Multiplier
= 102,946.9 * 1/20
= 5,147.345
Calculate the open loss
Open Loss = Number of Contract * Absolute Value {min[0, direction of order * (mark price — order price)]}
Direction of order: 1 for long order; -1 for short order
Open loss for long order
= Number of Contract * Absolute Value {min[0, direction of order * (mark price — order price)]}
= 1 * Absolute Value {min[0, 1 * (102,941.0–102,998.27)]}
= 1 * Absolute Value {min[0, -57.27]}
= 1 * 57.27
= 57.27
An open loss occurs when you place a long order.
Open loss for short order
= Number of Contract * Absolute Value {min[0, direction of order * (mark price — order price)]}
= 1 * Absolute Value {min[0, -1 * (102,941.0–102,946.9)]}
= 1 * Absolute Value {min[0, 5.9]}
= 1 * 0
= 0
An open loss does not occur when you place a short order.
Calculating the cost of opening a position
Since open loss occurs when you place a long order, it costs more to place a long order. In addition to the initial margin, you must also take into account the open loss.
Cost of opening a long order
= 5,149.9135+57.27
= 5,207.1835
Cost of opening a short order
= 5,147.345+0
= 5,147.345
Since there is no open loss when you place a short order, the cost of opening a short order is equal to the initial margin.
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