Articles on: Trading

Margin Interest

Leverage allows you to increase your exposure to the markets beyond the size of your balance. If you want to get started trading with leverage, check out this guide: Trading with Leverage.

While leverage opens up a world of possibilities for traders, you have to remain mindful of the fees attached with increasing your exposure. Aside from increased spreads, interest on leveraged trades can also impact your performance and profitability.

Margin Interest

Like in traditional financial markets, there is a cost associated with borrowing funds to increase your exposure. This leverage fee is deducted as an ongoing interest rate.

On Morpher, all positions with leverage incur a daily, non-compounding fee of 0.03% net exposure.

The basic math for interest costs: (leverage - 1) x 0.03% x (days position held)

How It Works

The interest is automatically deducted from the value of your position. This is a non-compounding interest rate, so the rate doesn't change. Since the interest rate is added daily, holding leveraged positions for longer results in paying more total interest. Similarly, since the rate is based on net exposure, positions with bigger leverage pay more interest.

Margin Interest Example

Let’s walk through an example: you buy AAPL stock with a leverage of 2, and sell your position after one year. In that one year, you would have accumulated 10.95% in interest. Meanwhile Apple was up 68%.

Your returns with no leverage: 68%
Your returns with 1.5x leverage: (1.5 x 68%) - 5.475% = 96.5%
Your returns with 2x leverage: (2 x 68%) – 10.95% = 125%
Your returns with 3x leverage: (3 x 68%) – 21.9% = 182%
Your returns with 10x leverage: (10 x 68%) – 109.5% = 570.5%

Ways to Reduce Fees

Use less leverage.
Don't keep trades open for a long time.

Negative Balance Protection

As with all Morpher trades, you can never lose more than what you invest. The margin interest is deducted from the value of your position. You do not need to maintain any balance to cover the margin interest. There are no extra fees collected if your position liquidates.

Existing Leveraged Positions

Margin interest was originally introduced on March 30th, 2021 with a rate of 0.015%. Leveraged positions opened before this date only started paying interest from March 30th onward.

2022 Interest Rate Increase

Margin interest increased to 0.03% on February 10th, 2022. If you have a position opened prior to February 10th, your interest payment is a weighted average of the two rates.

Avg rate: [ 0.03% x (days since February 10) / (days position held) ] + [ 0.015% x (days before February 10) / (days position held) ]

Morpher doesn't profit from fees. Tokens spent on spreads and margin interest are burned. Read more about token burning and minting

Updated on: 31/05/2023

Was this article helpful?

Share your feedback


Thank you!