Linear contracts are USD-margined, quoted in USD, and settled in USD. You can only trade linear contracts using your USD Contract Trading Account.
Let’s walk through an example using our recently added BTCUSD Linear Contract. Although you would be trading based on the price movements of BTC, you do not need to hold any BTC in your account. Instead, to open positions, you will use USD as your margin. Any profits or losses you incur at the time of closing your position will be paid or subtracted in USD.
Linear contracts are useful when you expect prices to decrease and you want to short an asset. Assume you have a short BTCUSD linear contract position – as the prices decrease, you can accumulate your profits in USD. If you were accumulating your profits in BTC, the USD value of your profits would decrease as the price of BTC decreases.
Inverse Contracts are crypto-margined, quoted in USD, but settled in the underlying crypto. You can only trade inverse contracts using the appropriate Crypto Contract Trading Account.
Let’s walk through an example using our recently added ETHUSD Inverse Contract. To open a position you must already hold ETH for margin in the ETH Contract Trading Account. Any profits or losses you incur at the time of closing your position will be paid or subtracted in ETH.
Inverse contracts are useful when you expect prices to increase and you want to long an asset. Assume you have a long ETHUSD inverse contract position. As the prices increase, you will accumulate your profits in ETH. The USD value of your accumulated ETH will continue to increase with its rising prices. Had you used a linear contract, you would end up with less value in USD than compared to holding ETH at the end of your trade.