Recently, I’ve been chatting with a few traders, and I found that many people still have misunderstandings about coin-margined contracts. I’d like to share my practical experience.

First, let’s talk about the most basic logic: coin-margined contracts use coins as collateral, and profits and losses are calculated in coins. This is completely different from USDT-margined contracts. But it’s not just a difference in the units—it’s a difference in the entire trading logic.

What I find most interesting about coin-margined contracts is that they inherently come with a one-times long attribute. Think about it: to open a coin-margined contract, you first have to buy coins with USDT, and the coin price’s rise or fall directly affects the spot portion. So this feature is natural. Because of that, a one-times short coin-margined contract is essentially “zero leverage”—it will never be liquidated. When the coin price drops, your contract gains more coins; when the coin price rises, although the number of coins decreases, the unit price is higher, so your total market value stays unchanged.

This is the risk-free arbitrage strategy I’ve been using. For example, I buy Bitcoin spot worth $100,000, and at the same time I open a one-times coin-margined short contract. No matter how the coin price moves, my total market value is always $100,000. The clever part is that the funding rate for Bitcoin contracts is positive most of the time, so the short contract can continuously earn funding fees, with an annualized return of about 7%. Just relying on this arbitrage strategy, I can outperform 80% of stock investors.

Now let’s talk about the margin mechanism of coin-margined contracts. The margin is calculated in coins, but the liquidation price is determined by the U-value at the time you opened the position. Because coin-margined contracts inherently carry that one-times long attribute, a one-times long contract will be liquidated when the coin price drops by 50%.

For example, I use $10,000 to buy 10,000 coins and open a one-times long position. When the coin price drops to close to 50%, I need to add margin. At this point, using the same $10,000, I can buy 20,000 coins to top up the margin. This creates a key advantage: you’re buying more coins at a lower price using the same U. Once the coin price rebounds, these additional coins will also generate gains. The original 10,000 coins lost $5,000 when the price fell 50%; after topping up, they become 30,000 coins. As long as the price rebounds to 67% of the opening price, you break even.

A three-times coin-margined short contract will be liquidated when the coin price rises by 50%. Suppose I open with $20,000 to buy 20,000 coins, and 10,000 coins are used for a three-times short. When the coin price rises by 50% and is close to liquidation, I need to add margin. At that time, I take the reserved 10,000 coins to top up. Here’s another advantage: because the coin price has increased, the 10,000 coins are now worth $15,000, but you only need to add coin value worth $10,000 to push the liquidation price up by one more factor—your safety margin is much higher than with USDT-margined contracts.

So my recommendation is that the advantages of coin-margined contracts must be built on low leverage. I usually use 1x to 3x, so I can truly leverage the flexibility of coin-margined contracts. High leverage, on the other hand, will cause you to lose these advantages—it’s not worth it.