Identifier: C6T5L5 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Decision: Calculate inverse profit in settlement coin, then value collateral and venue recovery in the spending currency. Objectives: Calculate inverse-contract coin profit; Combine coin collateral and USD value; Stress venue recovery separately from market profit. Prerequisite: C6T5L4.

All numerical offers, rates, prices, account chains, fees and contract parameters below are hypothetical, unless a primary document is expressly identified. They are not current executable offers or evidence that a Turkey-resident investor can access them. The assumed investor is a Turkey-resident individual outside a business, with no assumed US citizenship or tax residence; actual classification must be checked. Results are before actual tax unless a fictional tax schedule is explicitly supplied. No account, deposit or trade is required.

Mechanics

An inverse contract can quote USD face while settling profit in coin. A linear contract can fix base quantity and settle in a quote currency. Neither description is universal: read the exact unit and legal terms. Coin collateral can lose USD value while a long loses coin profit, creating wrong-way risk. Stablecoin collateral changes that exposure but adds depeg and issuer risks. Cross and isolated margin also have distinct account and loss-allocation rules.

Price and return drivers

For the declared inverse long, coin profit = USD notional × (1/entry price − 1/exit price). Add it to coin collateral, subtract coin funding and fees, then multiply by the valuation price for USD wealth. A linear USD result cannot be substituted without conversion. Liquidation may intervene before the hypothetical exit. A venue failure concerns a custody or counterparty claim in addition to instrument performance; state recovery base and timing explicitly.

Worked case

Synthetic inverse long has USD 10000 notional, entry 50000 USD/BTC and collateral 0.10 BTC. Exit 40000 gives 10000 × (1/50000 − 1/40000) = −0.05 BTC. Fees 0.001 and funding 0.0005 BTC leave balance 0.0485 BTC, worth USD 1940. Initial collateral was USD 5000, so total wealth loss is 3060. This combines the contract loss and falling collateral value. These are original inputs, not an actual venue position or a claim that it survives the risk engine.

Adverse case

Counterfactual exits 40000, 50000 and 60000 give coin profit −0.05, zero and +0.0333333 BTC. After costs 0.0015, coin balances are 0.0485, 0.0985 and 0.1318333; USD wealth is 1940, 4925 and 7910. If the venue then fails and only 40% of the final coin claim is recovered, no delay assumed, cash-equivalent recovery at 60000 is 3164, below the initial 5000. Recovery delay would add price uncertainty. Separately, a 10% stablecoin depeg makes 1000 nominal collateral worth 900 USD before contract losses.

Practical use

Verify entity, jurisdiction, settlement coin, face unit, margin mode, haircuts, liquidation, loss allocation, withdrawal and recourse. The checked Deribit source describes its own inverse units, not all crypto products or access for this investor. A service registration does not establish permission for every derivative. Include the quoted spread, commission, funding, custody, conversion and exit charges applicable to the actual route. Check investor residence/status, acquisition and income dates, effective tax rules and treaty scope before applying any actual tax; these cases remain before actual tax.

Decision boundaries

Decline if collateral cannot be valued in both coin and spending currency or if venue loss cannot be accepted. A hedge can reduce one asset exposure while adding settlement-coin and venue exposure. Compare feasible spot, domestic-wrapper and foreign-listed alternatives without calling any route risk-free. Keep unwithdrawable account marks separate from money available for external liabilities.

Practice and references

Exercise: inverse long USD 4000, entry 20000, exit 16000, collateral 0.05 BTC, fees 0.0002 and funding 0.0001 BTC. Solution: coin profit −0.05; balance −0.0003, worth −4.80 USD at 16000 in counterfactual arithmetic. Collateral is exhausted, so actual liquidation would normally act earlier under its rules. No negative-balance protection is assumed. Initial collateral was 1000 USD; that amount alone does not define a contractual loss cap.

Takeaway: Calculate inverse profit in settlement coin, then value collateral and venue recovery in the spending currency. References: product card, formula; glossary: Inverse contract; Coin collateral; Wrong way risk; Venue claim. Next: C6T6L1. Topic test.

Sources: GIB: Investment Income Guide (retrieved 2026-10-26; Introduction and foreign income/reporting framework). Deribit: Inverse Perpetual (retrieved 2026-10-26; Settlement coin, USD contract unit and funding mechanism). Deribit: Liquidations (retrieved 2026-10-26; Risk engine, incremental liquidation and account control). CFTC: Understand Risks of Virtual Currency Trading (retrieved 2026-10-26; Leverage, venue and index risks). Revision: 2026-10-26; recheck changeable rules before publication.

Shared reference guide | Class examination