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Hoping someone could help a noob. Let's say I have 10,000 USD in an account and want to short ETH with 1,000 USD with 5x leverage (5k USD total).

With this, my margin level be 1,000%, yes? (10,000 / 1,000)x100

If the price of ETH were then to go down 20% after opening this position, what would my margin level be?

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Before the price change, you have:

  1. +$10,000 cash deposited
  2. +$5,000 from sale of eth borrowed
  3. -$5,000 worth of ETH owed

So equity is $10,000, margin used is $5,000/5.

After the price change, you have:

  1. +$10,000 cash deposited
  2. +$5,000 from sale of eth borrowed
  3. -$4,000 worth of ETH owed

Now, equity is $11,000, margin used is $4,000/5 or $800. That gives a margin level of 1375%.

  • Thanks, David! So if ETH were to go UP 20%, it'd be the following: +$10,000 cash deposited +$5,000 from sale of eth borrowed -$6,000 worth of ETH owed Equity is now 9,000. Margin used = 6000/5 or $1200 (9,000 / 1200) x100 = 750% as margin level? – Joe Nov 18 '18 at 23:34
  • @Joe Yes, that's correct. – David Schwartz Nov 18 '18 at 23:49

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