> ## Documentation Index
> Fetch the complete documentation index at: https://docs.derivadex.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Margin Requirements

> DerivaDEX margin reference for strategy-level cross-margining, OMF and IMF admission rules, maintenance margin thresholds, and liquidation-trigger calculations.

DerivaDEX applies margin at the strategy level. Each strategy is cross-margined in USDC, risk is measured from the current mark price, and two thresholds govern risk: one for opening or increasing exposure, and one for liquidation.

## Core margin quantities

These quantities appear throughout the platform's risk checks.

| Quantity                         | Definition                                                                                           | Used for                                              |
| -------------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------------------------------------------- |
| Strategy value                   | Available collateral plus unrealized PnL, marked at current mark prices                              | Base account value for margin monitoring              |
| Total position notional          | Sum of `abs(position_size) × mark_price` across open positions                                       | Denominator for margin fraction and leverage          |
| Total open position notional     | Sum of worst-case exposure notional across positions and resting orders that could increase exposure | Denominator for open margin fraction and weighted IMF |
| Margin fraction (`MF`)           | `strategy_value / total_position_notional`                                                           | Liquidation monitoring                                |
| Open margin fraction (`OMF`)     | `min(strategy_value, available_collateral) / total_open_position_notional`                           | Pre-trade admission for exposure-increasing orders    |
| Initial margin fraction (`IMF`)  | Weighted required initial-margin fraction across total open position notional                        | Threshold that `OMF` must meet or exceed              |
| Maintenance margin ratio (`MMR`) | `MMR_FRACTION / max_leverage`                                                                        | Liquidation threshold                                 |

The **mark price** (not the **last trade price**) is the risk input for notional, PnL, and liquidation checks. See [Price Feeds and Mark Price Inputs](/reference-public/price-feeds-and-mark-price-inputs).

## Strategy leverage and shared constants

The baseline margin requirements come from the strategy's leverage setting and two shared protocol constants.

| Parameter                        |              Value | Notes                                                  |
| -------------------------------- | -----------------: | ------------------------------------------------------ |
| Default strategy max leverage    |               `3x` | DerivaDEX strategies default to `3x` leverage          |
| Base initial margin fraction     | `1 / max_leverage` | At `3x`, the base IMF is `0.3333...` (`33.33%`)        |
| `IMF_FACTOR`                     |           `0.0004` | Adds a size-scaling term for very large open positions |
| `MMR_FRACTION`                   |             `0.15` | Shared maintenance constant used with `max_leverage`   |
| Maintenance margin ratio at `3x` |      `0.05` (`5%`) | `0.15 / 3`                                             |

## Initial margin admission rule

DerivaDEX checks initial margin on the post-execution strategy state. An order that opens or increases exposure is accepted only if the resulting `OMF` is at least the resulting `IMF`.

```text theme={null}
position_imf = max(1 / max_leverage, IMF_FACTOR × sqrt(open_position_size))
portfolio_imf = sum(position_imf_i × open_position_notional_i) / sum(open_position_notional_i)
omf = min(strategy_value, available_collateral) / total_open_position_notional
admission rule: omf >= portfolio_imf
```

| Input                                                | Definition                                                                                                                                                                       | Notes                                                                                     |
| ---------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- |
| Open position size                                   | The larger absolute exposure that would exist in one market if the strategy's current position and exposure-increasing resting orders were fully filled in the riskier direction | Includes posted bids and asks, not just filled positions                                  |
| Open position notional                               | `open_position_size × mark_price`                                                                                                                                                | Used to weight each market's IMF contribution                                             |
| Position IMF                                         | `max(1 / max_leverage, IMF_FACTOR × sqrt(open_position_size))`                                                                                                                   | Small positions use the leverage floor; very large positions pick up the square-root term |
| Portfolio IMF                                        | Notional-weighted average of the position-level IMFs                                                                                                                             | One strategy can hold multiple products, so the requirement is aggregated                 |
| `min(strategy_value, available_collateral)` in `OMF` | The numerator is capped at available collateral when unrealized PnL is positive                                                                                                  | Unrealized gains do not increase opening power; unrealized losses still reduce it         |

## Maintenance margin and liquidation trigger

Once a strategy has open exposure, liquidation monitoring uses `MF` rather than `OMF`.

```text theme={null}
strategy_value = available_collateral + unrealized_pnl
total_position_notional = sum(abs(position_size_i) × mark_price_i)
mf = strategy_value / total_position_notional
mmr = MMR_FRACTION / max_leverage
liquidation trigger: mf < mmr
```

| Quantity                      | Meaning                                                                     |
| ----------------------------- | --------------------------------------------------------------------------- |
| `strategy_value`              | Collateral plus unrealized PnL across all open positions in the strategy    |
| `MF`                          | Current solvency ratio of the strategy against its marked notional exposure |
| `MMR`                         | Minimum `MF` required to keep the strategy out of liquidation               |
| Liquidation threshold at `3x` | `5%` (`0.05`)                                                               |

## When each rule applies

The platform applies the same margin model differently depending on whether an order increases or reduces risk.

| Case                                                                                          | Margin rule                                                                                                                   |
| --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- |
| Opening a new position                                                                        | Post-execution `OMF >= IMF` must hold                                                                                         |
| Increasing an existing position                                                               | Post-execution `OMF >= IMF` must hold                                                                                         |
| Posting resting liquidity that could increase exposure if filled                              | Included in open-position sizing for `OMF` and `IMF` checks                                                                   |
| Reducing or closing an existing position without crossing through flat into the opposite side | The order can bypass the `OMF >= IMF` admission check because it improves exposure; solvency and execution guards still apply |
| Existing open position after entry                                                            | `MF` is monitored against `MMR` for liquidation                                                                               |

## Worked margin cases

These examples show the two thresholds in action, including a rejection where opposite-side resting orders still leave a larger absolute exposure in one direction.

| Case                                                                                                                                                           | Calculation                                                                                                                                                      | Outcome                                                                                                                                                                                   |
| -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| New short order with `1,000` USDC collateral, `1` contract of open exposure, and mark price `1,100`                                                            | `OMF = 1,000 / (1 × 1,100) = 0.9091`; `IMF = max(1 / 3, 0.0004 × sqrt(1)) = 1 / 3`                                                                               | Accepted because `0.9091 >= 0.3333...`                                                                                                                                                    |
| Second order increases the same strategy to `2` contracts of open exposure at the same `1,100` mark, while unrealized PnL contributes `+250` to strategy value | `OMF = min(1,250, 1,000) / (2 × 1,100) = 1,000 / 2,200 = 0.4545`; `IMF` remains `1 / 3`                                                                          | Still accepted because unrealized gains do not raise the numerator above available collateral, but `0.4545 >= 0.3333...`                                                                  |
| Existing long `2` contracts with `1,000` USDC collateral, mark price `1,000`, resting bid for `2` more contracts, and resting ask for `1` contract             | Worst-case open position size is `max(abs(2 + 2), abs(2 - 1)) = max(4, 1) = 4`; `OMF = 1,000 / (4 × 1,000) = 0.25`; `IMF = max(1 / 3, 0.0004 × sqrt(4)) = 1 / 3` | Rejected with `OMFLessThanIMF` because the risk check uses the larger reachable absolute exposure, so the opposite-side ask does not offset the bid enough to satisfy `0.25 >= 0.3333...` |
| Liquidation check with `5,000` USDC collateral, short `100` contracts, mark price `145`, and unrealized PnL `-4,500`                                           | `strategy_value = 5,000 - 4,500 = 500`; `MF = 500 / (100 × 145) = 0.03448`; `MMR = 0.15 / 3 = 0.05`                                                              | Liquidatable because `0.03448 < 0.05`                                                                                                                                                     |

## Size-scaling threshold

The square-root `IMF_FACTOR` term matters only once a position is large enough to exceed the base leverage floor.

| Quantity                        |                                                      Value |
| ------------------------------- | ---------------------------------------------------------: |
| Crossover condition             | `IMF_FACTOR × sqrt(open_position_size) > 1 / max_leverage` |
| Crossover size at `3x` leverage |                  `((1 / 3) / 0.0004)^2 ≈ 694,444.44` units |
| Below the crossover size        |                                   `IMF = 1 / max_leverage` |
| Above the crossover size        |              `IMF = IMF_FACTOR × sqrt(open_position_size)` |

## API fields and rejection codes

Programmatic integrations can inspect the current maintenance state and detect failed initial-margin checks from API responses.

| API field or code                 | Meaning                                                                                      |
| --------------------------------- | -------------------------------------------------------------------------------------------- |
| Strategy metrics `marginFraction` | Current `MF` for the strategy                                                                |
| Strategy metrics `mmr`            | Current maintenance margin ratio; the strategy can be liquidated when `marginFraction < mmr` |
| Safety failure `OMFLessThanIMF`   | The post-execution strategy state would leave `OMF` below `IMF`, so the order is rejected    |

## Related references

The strategy's leverage setting and other trading parameters can change through product or governance updates.

* [Product and Trading Specifications](/reference-public/product-and-trading-specifications)
* [Price Feeds and Mark Price Inputs](/reference-public/price-feeds-and-mark-price-inputs)
* [Trading Safeties and Guards](/reference-public/trading-safeties-and-guards)
* [Error Reference](/reference-public/error-reference)