What is Delta Neutral Account?

Disclaimer: In compliance with MiCA requirements, unauthorized stablecoins are subject to certain restrictions for EEA users. For more information, please click here. 

Delta Neutral Accounts are introduced to enhance the trading experience for users running Delta Neutral strategies. Eligible Delta Neutral Accounts will have a lower ADL ranking than the other accounts for the hedged positions for USDⓈ and Coin Margin Futures.

Delta neutrality is evaluated for each Delta Neutral Account by comparing the total delta of long positions/assets and the total delta of short positions/assets of the same underlier. It isn’t affected by any other risk metrics, including (but not limited to) collateral requirements, calculations of liquidation thresholds.

To qualify as a Delta Neutral Account, an account must meet all of the following requirements:

1. Portfolio Margin (PM) or Portfolio Margin (PM) Pro;

2. VIP 4 and above;

3. Delta Neutral threshold ‘relative_diff’ < 0.05

• ‘relative_diff’ measures how close your position is to being Delta Neutral by comparing the long_delta and short_delta across Futures and Cross Margin accounts.

4. Delta Mode is enabled

• Only PM and PM Pro users of VIP 4 and above can enable Delta Mode.
• Accounts that do not enable Delta Mode are not eligible even if their ‘relative_diff’ < 0.05.
• Delta Mode can only be enabled per account, enabling it on master accounts won’t enable it for subaccounts.

How to enable Delta Mode for the account?

POST /sapi/v1/portfolio/delta-mode

How to query the account’s Delta Mode Status?

GET /sapi/v1/portfolio/delta-mode

Frequently Asked Questions

How to calculate ‘relative_diff’?

For all assets and positions of the underlier (e.g. BTC, ETH):
(UM = USDS Margin Futures; CM = Coin-Margin Futures)

• relative_diff = abs(long_delta - short_delta) / max(long_delta, short_delta)
• long_delta = abs(Cross Margin Balance + Positive UM Delta + Positive CM Delta +  Positive UM Balance + Positive CM Balance)
• short_delta = abs(-1 * Cross Margin Debt + Negative UM Delta + Negative CM Delta +  Negative UM Balance + Negative CM Balance)
• UM Delta = UM position size * side (1 for long and -1 for short)
• CM Delta = CM position size * contract multiplier / entry price * side

Please note: ETHBTC Futures position cannot hedge with any other positions/assets.

How to decide the ADL ranking of Delta Neutral Accounts?

• Delta Neutral Account’s ADL queue is inserted after the other accounts’ ADL queue, and therefore enjoys a lower ranking.
• The ranking within the Delta Neutral queue follows the same ranking logic as before.
• Note that though relative_diff is calculated in real time, it may take some time for the ADL ranking to be updated accordingly.

Can Spot assets or Option positions be used for hedging?

Only the below can be used for hedging:

• Assets in Cross Margin and Futures Account
• Debts in Cross Margin Account
• Futures positions

So assets in Spot Account and Option positions cannot be used for hedging.

Will it affect the latency to enable Delta Mode?

No, there is no latency impact in any aspect.

Is it necessary to close the positions before enabling Delta Mode?

No, it is not necessary.

What if the account drops below VIP4 or has PM disabled when Delta Mode is on?

No change if it drops below VIP4, but if PM is disabled the Delta Mode will be disabled too.

Can BNSOL hedge with SOL positions and WBETH with ETH positions?

Yes, in calculating ‘relative_diff’, BNSOL in Cross Margin Account will be converted to SOL and WBETH to ETH using the relevant index prices. Use GET /sapi/v1/portfolio/asset-index-price to query the index prices used for conversion.

Case study:

1. ADL ranking before the change:

2. ADL ranking after the change:

3. How to calculate ‘relative_diff’ for BTCUSDT:

Note: The case study assumes that BTCUSD_PERP‘s entry price is 100,000.

For user 1:

• long_delta = abs(1 + 100 * 100 / 100,000 + 0.1) = 1.2
• short_delta = abs(-0.3 - 0.5 - 0.4) = 1.2
• relative_diff = abs(1.2 - 1.2) / max (1.2, 1.2) = 0, which means it is Delta Neutral.

For user 2:

• long_delta = abs(2 + 0.7 + 0.3) = 3
• short_delta = abs(-3 + -300 * 100 / 100,000 - 3.5) = 6.8
• relative_diff = abs(3 - 6.8) / max(3, 6.8) = 0.55, which is not considering Delta Neutral.

Summary: 

In the example above, both User 1 and User 2 have enabled Delta Mode. However, only User 1 meets the ‘relative_diff’ threshold, and is therefore ranked after User 2/3/5 who are not Delta Neutral. User 5 and User 1 both meet the threshold, but User 5 is still ranked after User 1 following the same logic as before.