2024-01-18 10:22:10The answer is no. On Bybit, the main function of applying leverage is to determine the initial margin rate required to open your position, and selecting higher leverage does not directly amplify your profits.
For example, Trader A opens a 20,000 Qty Buy Long inverse perpetual BTCUSD position on Bybit. Refer to the table below to understand the relationship between leverage and initial margin.
| Leverage | Position Qty (1 Qty = 1 USD) | Initial Margin Rate (1/Leverage) |
Initial Margin Amount (BTCUSD) |
| 1x | 20,000 USD | (1/1) = 100% | 20,000 USD worth in BTC |
| 2x | 20,000 USD | (1/2) = 50% | 10,000 USD worth in BTC |
| 5x | 20,000 USD | (1/5) = 20% | 4,000 USD worth in BTC |
| 10x | 20,000 USD | (1/10) = 10% | 2,000 USD worth in BTC |
| 50x | 20,000 USD | (1/50) = 2% | 400 USD worth in BTC |
| 100x | 20,000 USD | (1/100) = 1% | 200 USD worth in BTC |
Note:
1) Position Qty is the same regardless of leverage applied
2) Leverage determines the initial margin rate.
- The higher the leverage, the lower the initial margin rate and thus a lower initial margin amount.
3) Initial margin amount is calculated by taking position qty multiply by initial margin rate.
Next, Trader A is considering closing his 20,000 Qty Buy Long position at USD 60,000. Assuming that the average entry price of the position was recorded at USD 55,000. Refer to the table below shows the relationship between leverage, Unrealized P&L (profit and loss) and Unrealized P&L%.
| Leverage | Position Qty (1 Qty = 1 USD) | Entry Price | Exit Price |
Initial Margin Amount based on entry price of USD 55,000 (A) |
Unrealized P&L based on exit price of USD 60,000 (B) |
Unrealized P&L% (B) / (A) |
| 1x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 1) = 0.36363636 BTC | 0.03030303 BTC | 8.33% |
| 2x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 2) = 0.18181818 BTC | 0.03030303 BTC | 16.66% |
| 5x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 5) = 0.07272727 BTC | 0.03030303 BTC | 41.66% |
| 10x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 10) = 0.03636363 BTC | 0.03030303 BTC | 83.33% |
| 50x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 50) = 0.00727272 BTC | 0.03030303 BTC | 416.66% |
| 100x | 20,000 USD | 55,000 | 60,000 | 20,000/(55,000 x 100) = 0.00363636 BTC | 0.03030303 BTC | 833.33% |
Note:
1) Notice that despite different leverages being applied for the same position qty, the resulting Unrealized P&L based on exit price of USD 60,000 remains constant at 0.03030303 BTC.
- Therefore, a higher leverage does not equal to a higher P&L.
2) Unrealized P&L is calculated by taking into consideration the following variables: Position Qty, Entry Price and Exit Price
- The higher the Position Qty = the greater the P&L
- The larger the price difference between entry price and exit price = the greater the Unrealized P&L
3) Unrealized P&L% is calculated by taking the Position Unrealized P&L / Initial Margin Amount (B) / (A).
- The higher the leverage, the lower the initial margin amount (A), the higher the Unrealized P&L%
- For more info, please refer to the articles below
4) The Unrealized P&L and P&L% illustration above does not take into consideration any trading fees or funding fees. For more info, please refer to the following articles
Yes
No