Introduction to USDT-Margined Contracts
USDT-margined contracts are derivative products in the digital asset space. Traders can speculate on price movements by opening long (buy) or short (sell) positions, with profits or losses calculated in USDT as the settlement currency. These contracts are divided into two main types:
– USDT-margined perpetual contracts
– USDT-margined delivery (futures) contracts
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Types of USDT-Margined Contracts
1. USDT-Margined Perpetual Contracts
- No expiration date: Unlike futures, perpetual contracts do not settle on a fixed date.
- Funding rate mechanism: Prices are anchored to the spot market via periodic funding fee exchanges between long and short positions.
- 8-hour settlements: Unrealized profits/losses and funding fees are converted to realized P&L and transferred to the user’s account balance.
2. USDT-Margined Delivery Contracts
- Fixed expiry date: Settled on a predetermined day (e.g., weekly, quarterly).
- Cash settlement: Positions are closed at the arithmetic average index price during the last hour before expiry. No physical delivery occurs.
Key Mechanisms of USDT-Margined Contracts
Order Matching & Liquidation
- Orders follow price-time priority for execution.
- Forced liquidation occurs when the margin ratio drops to ≤0%.
Margin Ratio Formulas:
- Isolated Margin Mode:
Margin Ratio = (Equity / Position Margin) × 100% – Maintenance Margin Rate - Cross Margin Mode:
Margin Ratio = Equity / ∑ (Position Margin × Maintenance Margin Rate) – 100%
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Margin Modes: Isolated vs. Cross
Isolated Margin Mode
- Separate accounts per asset: Funds are allocated to specific contracts (e.g., BTC, ETH).
- No cross-position impact: Liquidation of one position (e.g., BTC) doesn’t affect others (e.g., ETH).
Example: User A’s BTC position is liquidated, but their ETH position remains intact.
Cross Margin Mode
- Shared equity pool: All positions under cross margin share the same balance.
- Higher risk/reward: A single liquidation can affect multiple contracts.
Example: User B’s BTC, ETH, and weekly BTC positions may all be liquidated if the margin ratio falls below zero.
Note:
– Perpetual contracts support both margin modes.
– Delivery contracts only support cross margin.
Position Modes: One-Way vs. Two-Way
Two-Way (Hedge) Mode
- Hold long and short positions simultaneously for the same contract.
- Offsetting risks between positions.
One-Way Mode
- Only one active position direction (long or short) per contract.
- Reduce-only orders: Prevent accidental position increases.
USDT-Margined Delivery Contract Types
Huobi offers four delivery contract types:
| Type | Expiry Description |
|---|---|
| Weekly | Closest Friday to the trading date. |
| Bi-weekly | Second closest Friday. |
| Quarterly | Last Friday of March/June/September/December (nearest month, non-overlapping). |
| Bi-quarterly | Second-nearest quarter’s last Friday (non-overlapping). |
Special Expiry Rules
- Three-Contract Scenario (Weekly/Bi-weekly/Quarterly):
-
On the third-last Friday of a quarter, the system generates a new quarterly contract instead of a bi-weekly one to avoid duplicate expiries.
-
Four-Contract Scenario (Weekly/Bi-weekly/Quarterly/Bi-quarterly):
- Similarly, a new bi-quarterly contract is created to maintain distinct expiry dates.
Example:
– On September 11, 2020, a new December quarterly contract is generated, while the existing September quarterly becomes a bi-weekly contract.
USDT-Margined vs. Coin-Margined Contracts
| Feature | USDT-Margined | Coin-Margined |
|---|---|---|
| Quote Currency | USDT | USD |
| Collateral Asset | USDT only | Underlying coin (e.g., BTC for BTC/USD) |
| P&L Calculation | USDT | Underlying coin |
| Price Risk | USDT value stable; no coin volatility | Collateral value fluctuates with coin price |
Advantage of USDT Contracts: Hedging against crypto volatility since collateral (USDT) remains stable.
FAQ
1. Can I use both isolated and cross margin simultaneously?
Yes, for perpetual contracts. Delivery contracts only support cross margin.
2. How often are funding fees paid in perpetual contracts?
Every 8 hours, based on the funding rate.
3. What happens if my margin ratio hits 0%?
Positions are automatically liquidated to prevent negative balances.
4. Why choose USDT-margined over coin-margined contracts?
USDT contracts simplify collateral management and reduce exposure to coin price swings.
5. Are delivery contracts physically settled?
No, they’re cash-settled in USDT.
6. How are expiry dates adjusted for quarterly contracts?
New contracts are generated to avoid overlapping expiries (see “Special Expiry Rules”).
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Final Notes: