Cross-Margin Collateral Framework

IMPORTANT: Aevo will be introducing cross-margin collateral liquidations in order to bring more flexibility to its cross margin system. Please read the cross-margin trading rules section for more details.

Aevo's crypto options and perpetual futures are settled in USDC. On top of USDC collateral, we support a few types of collateral asset, each with their own collateral value ratio.

AssetLiquidation OrderCollateral RatioConvert fee

USDC

1

100%

0.00%

USDT

2

99%

0.01%

aeUSD

3

100%

0.00%

ETH

4

90%

0.10%

WBTC

5

90%

0.10%

The value of a collateral asset in a portfolio is:

Balance * Price of asset in USDC * Collateral Ratio

Based on liquidity and market conditions, Aevo will update the collateral value ratio over time.

Cross-margin Trading Rules

When a negative USDC balance is incurred AND the negative balance threshold of 1 USDC is met, the account's collateral would be auto-converted to top up the USDC balance. The auto-conversion process goes through the list of assets based on their liquidation order to convert into USDC.

There are 3 scenarios where a negative USDC balance could occur:

  1. Buying an option.

  2. Selling an option and it expires in-the-money (paying for settlement).

  3. Realizing negative perpetual futures PNL.

Example

  1. Alice deposits 1 ETH. 1 ETH = $1000. Alice's equity is $1000.

  2. Alice uses $500 to buy options. This would bring Alice's USDC balance to -$500.

  3. Aevo will convert $500 of ETH into USDC. Alice's equity will still remain as $1000, but it will be composed of $500 of ETH, $0 of USDC, and $500 of ETH options.

Note: This example does not account for trading and conversion fees incurred.

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