Gemini are pleased to announce the immediate availability of cross collateral on the Gemini derivatives platform — providing clients with more flexible funding options.
With the introduction of cross collateral, clients are no longer “limited to only posting GUSD as collateral to trade derivatives on Gemini.”
Client using Gemini can now also “leverage your BTC holdings to trade derivatives, with ETH collateral becoming available in the coming weeks.”
When trading derivatives, clients are required “to deposit funds, known as collateral, in order to open and maintain derivatives positions.”
As explained in a blog post by Gemini, the collateral required to “open a position is your Initial Margin. The collateral required to keep your position open is known as Maintenance Margin, and the total amount of collateral available for trading is your Margin Assets Value.”
To learn more about margin, you may check out the explainer, Gemini Foundation Academy, via the crypto exchange’s official website.
Collateral serves as a buffer “to cover potential losses in the event that your position moves against you.”
Gemini further noted that clients are “required to hold sufficient collateral to meet margin requirements, and keep in mind that collateral assets are at risk of liquidation if margin requirements are not met.”
Here’s where cross collateral comes in. Until today, when trading derivatives on Gemini you could only deposit GUSD “as collateral to open and maintain derivatives positions.”
With the introduction of the new cross collateral feature, you can now “use BTC, and soon ETH, as collateral for your trades.”
Here’s an example of how this works:
Cross Collateral In Action
Let’s say a trader only holds BTC in his Gemini account and wants to open a derivatives position to reflect his short-term view on the price of PEPE.
Prior to Gemini’s new cross collateral feature, the trader would have only been able to use GUSD to trade derivatives on Gemini.
This means he would have had to convert some of his BTC holdings into GUSD to trade PEPE derivatives, and in turn lose some of his exposure to BTC.
Now, with cross collateral, the trader has more options. He can directly deposit BTC as collateral to open a position without having to sell some of his BTC for GUSD.
The cross collateral feature provides customers “with greater flexibility and capital efficiency.”
Customers can now pursue trading strategies “while retaining exposure to their chosen assets.”
Clients in certain supported regions can create a Gemini account (as long as they can prve they reside in a derivatives-enabled jurisdiction), you may sign up (in supported jurisdictions) for an account to “receive both a spot and derivatives trading account.”
The introduction of the cross collateral feature “marks a significant step forward in enhancing the trading experience on the Gemini derivatives platform.”