# Perps Basics

### Cross-Margin Account **for Enhanced Risk Management**

[Cross-margin](/v3-perps/margin-types-and-collateral.md) is a risk management tool designed to increase liquidity and reduce the likelihood of forced position liquidations for traders. This method offers greater flexibility however, traders must exercise caution as market volatility can lead to substantial fluctuations in unrealized gains or losses, potentially exceeding the initial collateral thus liquidating all funds in the account.

{% hint style="warning" %}
Cross-Margin is currently the only margin type available in v3. In the future, isolated positions will be available to provide flexibility to traders.
{% endhint %}

### Collateral in V3 

Unlike previous versions, where a sUSD was directly used by traders, v3 adds a new layer to the process. Now, every time you deposit or withdraw money, it goes through a wrapper mechanism, this means you can easily deposit and withdraw USDC on a one-to-one basis. This change makes onboarding funds more straightforward and versatile.

{% content-ref url="/pages/UlKDt78oKd2sOCK6xzio" %}
[Margin Types & Collateral](/v3-perps/margin-types-and-collateral.md)
{% endcontent-ref %}

### Funding Rates

The funding rate and premium/discount mechanism on Kwenta is unique; we have compiled a page that aims to address these topics in a comprehensive manner.

If the funding rate is in the negative, those in short positions compensate those in long ones. Conversely, with a positive rate, those in long positions pay those in short.

{% content-ref url="/pages/STJaK8zXhLT1RKC8gPHi" %}
[Funding](/v3-perps/funding.md)
{% endcontent-ref %}

## Jargon

**Unrealized Profit and Loss (UPNL)**

* UPNL showcases potential gains or losses that would result if a trader closed their position(s).
* It's calculated using the difference in  average entry price and the mark price

  <pre><code><strong>(avg entry price - avy exit(current) price ) * position size
  </strong></code></pre>

**Realized Profit and Loss (UPNL)**

* PNL showcases gains or losses that are a result of a trader closing their position(s).
* It's calculated using the difference in average entry price and the exit price

  <pre><code><strong>(avg entry price - avy exit price ) * position size exited) +/- Fees &#x26; funding 
  </strong></code></pre>

**Liquidation:**

* Refers to the forced closure or unwinding of a trader's open futures position due to insufficient margin or collateral to cover the required maintenance margin minimums.&#x20;

**Open Interest (OI)**

* OI gives the total value of ongoing perpetual contracts held by traders. These are contracts that remain open and haven't been closed.

**Account Health (Margin Ratio)**

* Represented as a percentage on both the dashboard & the main futures UI, it indicates the health of a trader's account.
* When the equity balance matches the maintenance margin account health will reach 100% & traders will get liquidated.

<pre><code><strong>AccountHealth = requiredMaintenanceMargin / availableMargin * 100
</strong></code></pre>

I**nitial Margin**

* Is the percentage of the purchase of a future position that must be covered by cash or collateral when leverage trading. (I.E to open a $1000 notional trade at 10x a initial margin of $100 is needed)

**Maintenance Margin**

* The minimum amount of equity a trader must maintain in their trading account to keep their position open. If the account balance (which combines deposited balances and UPNL) drops to this mark, liquidation will occur.

{% hint style="danger" %}
If account equity falls to or below the Maintenance Margin, liquidation will occur!
{% endhint %}

**Account Equity**

* A combination of a trader's account balance and UPNL, this metric indicates a balance as if all positions are closed at the current time.

```
account equity = DepositedBalance + UPNL
```


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