# [Tutorial] Understanding the basics of futures trading: USDT-margined vs. Coin-margined, PNL calculation

It has been said that the concept of futures trading is difficult for the uninitiated to grasp. When entering the futures trading page on a crypto exchange site, you will see terms such as delivery futures, perpetual swaps, USDT- or coin-margined contracts, options, and other products. Those new to the game may be at a loss and struggle to make sense of them all.

Indeed, it’s not easy for novices to distinguish all these products, not to mention start a trade and calculate profit and loss (PnL).

To help users understand derivatives trading in a faster and easier way, Huobi Medium will publish a series of tutorials, using simple examples to make trading rules easy to understand. This article explains the underlying concepts and the core differences between USDT-margined and coin-margined contracts. In the second part, we will explain the workings of PnL calculation to make it clearer.

🔹USDT-margined vs. Coin-margined

USDT-margined contracts are contracts with all elements calculated/quoted in USDT. USDT-margined contracts use USDT as the margin (collateral asset, which can be used to fund an order and the contracts’ prices are quoted in the same stablecoin. The same applies to how their PnL is calculated and presented.

Compared with USDT-margined contracts, coin-margined contracts are contracts with all elements calculated in a particular token. Take a coin-margined contract BTC/USD perpetual as an example. It uses Bitcoin (BTC) as the margin and its PnL is calculated using the latter token. However, its price is still quoted in USDT.

🔹PnL calculation

1) USDT-margined swaps

Take a BTC/USDT perpetual as an example. Sarah opens a long position of 1 BTC at the price of 19,279 USDT at Huobi Futures. After two weeks, the price of the perpetual rises to 20,279 USDT. The profit Sarah makes is 20,279–19,279 = 1,000 USDT.

(Transaction and funding fees are not considered in this example)

2) Coin-margined swaps

Take a BTC/USD perpetual as another example. Sarah opens a short position of 1 BTC at the price of 19,209 USDT at Huobi Futures. After two weeks, the price of the perpetual falls to 18,209 USDT, resulting in a profit of 19,209–18,209 = 1,000 USDT. However, as mentioned earlier, PnL for coin-margined contracts should be calculated in the same token, which is BTC in this example. Therefore, the final PnL for Sarah is 1,000/18,209 = 0.055 BTC, which is her income from this transaction.

(Transaction and funding fees are not considered in this example)

Thus far, in terms of PnL calculation, the only difference between coin-margined and USDT-margined contracts is that the former is calculated in a particular token, while the latter uses USDT. It’s worth noting that this makes coin-margined contracts more popular in a bull market, as the value of the token would have appreciated since the time of placing the order.

See, isn’t it easy to understand the basics of futures trading? Why not have a go and start trading on Huobi Futures?