The XBTUSD Swap is a Quanto derivative: the underlying is denominated in one currency (USD), but the instrument itself is settled in another currency (BTC).

About the BitMEX Calculator

NEWS 18 Sept 2018: AntiLiquidation.com is a BitMEX Anti-Liquidation Tool & Leverage Calculator. This free tool will save you up to 70% of your capital in losing trades. It also enables up to 700x leverage via tight Stop placement. Use for Risk Management & to improve your bottom line at BitMEX.

AntiLiquidation.com is configurable so you can input your own risk numbers. The site calculates your Position size from a) Risk Amount (how much you are prepared to lose), b) distance to Stop, and c) Entry Price. A checklist takes you through the structuring of a good trade that avoids all possibility of Liquidation and ‘blowing up’ your account.

There is a a Guide to accompany use of the AntiLiquidation tool: How to Use the BitMEX Anti-Liquidation Tool.

AntiLiquidation.com
30 June 2018: Save on BitMEX fees with this coupon. (BitMEX fees are much higher than on conventional exchanges because the fee applies to the entire leveraged position, not just your margin. For market trades fees are 0.075% of your position for both entry & exit. So total fees on a $1,000 trade with 100x leverage are $150 [100 x $1,000 x 0.00075 x 2]. Fees are 15% in that case.)

TL/DR The BitMEX Calculator is troubling when you first start using it. Why is the margin not what we expect? Why does the Profit/Loss calculation look wrong? Why does the Profit/Loss Calculator ignore Liquidation? Why does it show losses > 100%? Why is the Liquidation Price different to the one we mentally calculate? Is Arthur Hayes playing mind games with us?

Let’s take a quick walk around the BitMEX Calculator. You find it here:

Profit/Loss Calculator

Leverage is 10x so why is Margin 0.1015 and not 0.10?

Right. We have input a trade to buy 5894 XBTUSD swap contracts, Entry at the current price of 5,894 & Exit set at 6189 which is a 5% increase. Leverage is 10. We are buying a position worth 1 Bitcoin.

Why is the Margin not What we Expect?

Leverage is 10 and Margin is usually the reciprocal of Leverage multiplied by your position. So in this example Margin is 1/10 x 1 BTC position = O.10 BTC. Right? No.

Margin = (1/leverage) x position size + (2 x taker fee).

The taker fee is 0.075%.

Why does the Profit/Loss Calculation look Wrong?

The Exit price is 6189 which is a 5% increase. We have 10x leverage so we should be looking at a a 50% profit, right?

So why the hell is our ROE on the Calculator showing as 47.62%? Who stole the missing 2.38%? Is it hidden fees?

Relax. The answer lies here:

All currency units denominated in BTC

The BitMex calculator does not show any results in USD. Here they are. You can see we have made a 50% profit measured in USD. But it is only 47.62% when measured in (now more expensive) BTC.

With gains, ROE in USD > ROE in BTC

The larger the price increase the greater the discrepancy between the ROE % expressed in USD and in BTC. Look at a 50% increase in the price. The ROE in BTC is 333%. From the table above we see it is 500% in USD.

50% increase with 10x leverage -> 333% ROE

Why does the Profit/Loss Calculator Ignore Liquidation?

The Profit/Loss Calculator takes no account of Liquidation. This is quite a serious bug. The Liquidation Price Calculators shows this Short 100x trade at the current price of 6368 gets Liquidated at 6399.5. (That is a 0.4946 % increase.)

My own calculations confirm that Liquidation Price is correct.

Liquidation Price 6396 by my Calculator

Meanwhile over at the Profit Calculator and we feed in same values: The ROE is shown as -49.67%. In fact you are liquidated, 100% loss.

Nope. You are Liquidated and have ROE of -100%. This is a bug. Ground Control to Major Arthur, we have a problem.
Save on BitMEX fees with this coupon.

Why does the Profit/Loss Calculator Show Losses > 100%?

What if the trade goes belly up and we see a 20% fall to 4715?

Loss of 0.25 BTC. This is another bug.

We put up 0.1015 and now the Calculator is telling us we have lost 0.25 BTC. So BitMex will margin call us for 0.1485 BTC, the difference between what we put up and the loss?

No. In Isolated Margin mode your loss is limited to your Initial Cost. (This is not true in Cross Mode.)

See in my Sheet how a fall to 4715 results in loss of 0.10 BTC, or 100% of Initial Margin. Losses cannot exceed 100%.

With losses, note how the loss in BTC > Loss in USD

Liquidation Price Calculator: Why is the Liquidation Price Different to the Price We Mentally Calculate?

The Liquidation Price is the price where the Liquidation takes control of your position and closes it when the price moves against you and consumes your initial margin.

OK. We entered at 5894 with 10x leverage so we have 10% margin so we should get stopped out with a 10% drop, right? i.e. 5,304

So why is the Liquidation Price 5,383.5? That is closer to the Entry Price of 5,894 than 5,304 which is bad. Who stole $79 of our margin? Hidden fees?

It is to do with the distinction between the Bankruptcy price, the Liquidation Price and the Insurance Fund.

The mechanics of the BitMEX solution are that BitMEX sets a so-called Liquidation Price a fraction above the Bankruptcy Price (in the case of Longs) or a fraction below the Bankruptcy Price (Shorts). The $79 is taken by the Insurance Fund to maintain the stability and solvency of Bitmex’s limited risk trading.

I wrote this analysis of Liquidation and Bankruptcy Prices which explains that.

I am not going to try to explain these calculations of the two prices; suffice to say the results are correct. (Please check for yourself.)

Do not use leverage of >25 because most of your initial margin protects the Insurance Fund and not your position.

There is nowhere on the Bitmex platform where you can see your Bankruptcy price. You only get to see it in the dreaded Liquidation email.

Liquidation Price 9177. Bankruptcy Price 9097. The Insurance Fund got the $80 difference.

The Maintenance Margin Requirement makes 100x trading almost certain to lose. Look at a 100x trade:

The Liquidation Price is the same as in the Google Sheet above.

Entry Price 5894

Liquidation Price 5865

Bankrupty Price 5836

So you have bought (5894–5836) = $58 of Margin. But you are protected by only (5894–5865) = $29 of Margin. What happened to the other $29 you bought? It gets allocated to the Insurance Fund when you get liquidated. Look again at the Sheet. The higher the leverage the less of the Margin you buy actually protects your position.

Save on BitMEX fees with this coupon. (BitMEX fees are much higher than on conventional exchanges because the fee applies to the entire leveraged position, not just your margin. For market trades fees are 0.075% of your position for both entry & exit. So total fees on a $1,000 trade with 100x leverage are $150 [100 x $1,000 x 0.00075 x 2]. Fees are 15% in that case.)