This post is meant to explain how to place a trade using 25x leveraged BitMEX BTCUSD futures contracts. All the below examples assume that a trader deposits 10 BTC on BitMEX of equity.
Going Long
The trader believes that the BTCUSD exchange rate will rise. He has 10 BTC of equity; with 25x leverage, he can control a futures position worth 250 Bitcoin. The BTCUSD futures contract is trading at $100. Each contract pays out 0.00001 BTC per $1. Put another way, if the BTCUSD price rises by 1%, the BTC value rises by 1%.
To go long 250 BTC worth of futures contracts he must buy: 250 BTC / $100 * 0.0001 BTC = 250,000 contracts.
If the price rises by 10% to $110, his futures position is now worth: $110 * 0.00001 BTC * 250,000 Contracts = 275 BTC.
He has made a profit of: 275 BTC (Futures value at $110 BTCUSD price) – -250 BTC (Futures value at $100 BTCUSD price) = 25 BTC.
His return on 10 BTC of equity is: 25 BTC Profit / 10 BTC Equity = 2.5x.
Going Short
The trader believes that the BTCUSD exchange rate will fall. He has 10 BTC of equity; with 25x leverage, he can control a futures position worth 250 Bitcoin. The BTCUSD futures contract is trading at $100. Each contract pays out 0.00001 BTC per $1. Put another way, if the BTCUSD price falls by 1%, the BTC value falls by 1%.
To short 250 BTC worth of futures contracts he must sell: 250 BTC / $100 * 0.0001 BTC = 250,000 contracts.
If the price falls by 10% to $90, his futures position is now worth: $90 * 0.00001 BTC * -250,000 Contracts = -225 BTC.
He has made a profit of: -225 BTC (Futures value at $90 BTCUSD price) – 250 BTC (Futures value at $100 BTCUSD price) = 25 BTC.
His return on 10 BTC of equity is: 25 BTC Profit / 10 BTC Equity = 2.5x.