This article explains how to place a trade using leverage on BitMEX. For the purpose of this example, we will use a XBT/USD futures contract on BitMEX. Such contracts on BitMEX are inverse futures contracts, with one example being XBTU23 – contract symbols are comprised of the Bitcoin symbol (XBT), accompanied by the respective expiry month code and year (e.g. XBTU23 refers to an XBT inverse futures that expires in September 2023).
For this example, assume the trader deposits one XBT of equity, and takes on 25x leverage.
Please note that XBT is what we call Bitcoin at BitMEX, exactly the same as what some other platforms call BTC.
“Going Long” the XBT/USD Futures Contract
Let’s say, a trader believes that the XBT/USD exchange rate will rise and they have one XBT of equity. Using 25x leverage, the trader is able to control a futures position worth 25 Bitcoin. The XBT/USD futures contract is trading at $30,000 USD, and each contract is worth one USD of Bitcoin at any price. This means that if the XBT/USD price goes up by 1%, the XBT value also goes up by 1%.
If the trader wants to go long on 25 XBT worth of futures contracts, the trader must buy 750,000 contracts, which is 25 XBT / (1 / $30,000).
If the XBT/USD futures contract price rises by 10% to $33,000, the trader’s position is now worth 27.5 XBT.
The trader has made a profit of 2.5 XBT, for that is 27.5 XBT (Futures value at $33,000 XBT/USD price) – 25 XBT (Futures value at $30,000 XBT/USD price).
If the above trade is made using 25x leverage, the trader’s return on their one XBT equity would have been 2.5x: 2.5 XBT (Profit) / 1 XBT (Equity).
“Going Short” the XBT/USD Futures Contract
In contrast, the trader believes that the XBT/USD exchange rate will fall. They have one XBT of equity. With 25x leverage, the trader can control a futures position worth 25 Bitcoin. The XBT/USD futures contract is trading at $30,000, and each contract is worth one USD of Bitcoin at any price. This means if the XBT/USD price falls by 1%, the XBT value also falls by 1%.
If the trader wants to go short on 25 XBT worth of futures contracts, the trader must sell 750,000 contracts, which is 25 XBT / (1 / $30,000).
If the XBT/USD futures contract price falls by 10% to $27,000, the trader’s position is now worth -22.5 XBT.
The trader has made a profit of 2.5 XBT, for that is -22.5 XBT (Futures value at $27,000 XBT/USD price) – 25 XBT (Futures value at $30,000 XBT/USD price).
If the above trade is made using 25x leverage, the trader’s return on their 1 XBT equity would be 2.5x.
Aside from the XBT/USD futures contracts, BitMEX is one of the few cryptocurrency exchanges that continues to innovate and offers an ever-growing range of crypto derivative products.
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