Margin Framework

Flash Trade's margin system uses two key parameters to manage risk and enable leveraged trading across different asset pools. Understanding these requirements is essential for maintaining healthy positions and avoiding liquidations.

Overview

The margin framework consists of two main components:

• Minimum Initial Margin - Minimum collateral required to open a position

• Minimum Maintenance Margin - Minimum collateral required to keep a position open

These parameters vary by pool type to reflect different risk profiles and market conditions.

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Margin Requirements by Pool

Pool	Assets	Min Init. Margin	Min Maint. Margin	Max Leverage
Crypto (Pool 1)	BTC, ETH, SOL	1% of position size	0.2% of position size	100x / 500x
Synthetic (Pool 2)	FX, Metals, Oil	1% of position size	0.5% of position size	100x / 200x
Solana Beta (Pool 3)	JUP, JTO, RAY, etc.	2% of position size	1.0% of position size	50x / 100x

Understanding the Numbers

Initial Margin (Opening Positions):

• Pool 1: 1% = 100x maximum leverage

• Pool 2: 0.5% = 100x maximum leverage

• Pool 3: 5% = 50x maximum leverage

Maintenance Margin (Keeping Positions Open):

• Pool 1: 0.2% = 500x effective leverage at liquidation

• Pool 2: 0.25% = 200x effective leverage at liquidation

• Pool 3: 1.0% = 100x effective leverage at liquidation

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High Volatility Flag Impact

During periods of high market volatility, Flash Trade's pricing engine activates special risk management protocols that affect collateral valuation and position management.

Collateral Valuation During Volatility

When the High Volatility Flag is active (as defined in the Price Engine section):

Conservative Pricing: The lower bound of Pyth's confidence interval determines your collateral value, providing extra protection against rapid price movements.

Position Pricing During Volatility

During High Volatility Flag periods, position pricing follows conservative principles:

Risk-Minimizing Approach: Prices used for opening/closing positions and liquidation calculations will maximize liabilities and minimize assets for traders.

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Position-Specific Volatility Rules

Long Positions

When holding long positions during High Volatility Flag periods:

Price Impact:

• Lower bound of Pyth's confidence interval is used for both:

  • Collateral valuation (discounted value)

  • Current PnL calculation (reduced profits)

Liquidation Risk:

• Double impact from discounted collateral AND reduced PnL

• If combined effect drops below maintenance margin → Liquidation triggered

Example Scenario:

Long SOL Position: $100 collateral, $150 current price Pyth Price: $150 ± $10 confidence interval High Volatility Flag: Uses $140 (lower bound) Result: Both collateral and PnL calculated at $140

Short Positions

When holding short positions during High Volatility Flag periods:

Price Impact:

• Upper bound of Pyth's confidence interval is used as a premium

• This increases the effective price affecting your position's PnL

• Higher effective prices reduce short position profitability

Liquidation Risk:

• If the adjusted pricing causes collateral to fall below maintenance margin → Liquidation triggered

• Stablecoin depegs compound this risk by reducing collateral value below $1

Example Scenario:

Short ETH Position: $2,000 entry price Pyth Price: $1,950 ± $50 confidence interval High Volatility Flag: Uses $2,000 (upper bound) Result: No profit recognition despite favorable market move

Risk Management Implications

For Long Positions

Risk Factor	Impact	Mitigation
Discounted Collateral	Reduced margin buffer	Monitor confidence intervals
Lower Bound PnL	Conservative profit calc	Plan for volatility periods
Double Discount	Accelerated liquidations	Use conservative leverage

For Short Positions

Risk Factor	Impact	Mitigation
Price Premiums	Reduced profitability	Monitor volatility flags
Stablecoin Depegs	Collateral value loss	Use diversified collateral
Upper Bound Pricing	Earlier liquidations	Maintain higher margins

Best Practices

1

Margin Management

• Maintain Buffer: Keep collateral well above minimum requirements

• Monitor Volatility: Watch for High Volatility Flag activation

• Size Appropriately: Use lower leverage during uncertain periods

2

Risk Monitoring

• Track Confidence Intervals: Large intervals indicate higher risk periods

• Position Health: Regularly check how volatility pricing affects your positions

• Liquidation Distance: Calculate margin to liquidation under worst-case pricing

3

Strategic Considerations

• Volatility Timing: Consider closing positions before volatile events

• Collateral Quality: Prefer stable collateral during uncertain periods

• Leverage Scaling: Reduce leverage when confidence intervals widen

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Technical Details

Margin Calculation Formula

Position Health = (Collateral Value + Unrealized PnL) / Position Size

Where during High Volatility Flag:

• Collateral Value = Lower Bound of Confidence Interval

• Unrealized PnL = Calculated using bounds that minimize trader assets

Liquidation Trigger

Liquidation occurs when: Adjusted Position Health < Maintenance Margin Requirement

For Pool 1: Health < 0.2% of position size For Pool 2: Health < 0.25% of position size For Pool 3: Health < 1.0% of position size