Can someone please help me understand closing margin positions?
My question revolves around how profit is returned to you when closing a position.
If I margin buy eth using eth as collateral I have borrowed btc and used it to buy eth. If the price then goes up and I close my position what happens? I can think of two different things.
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Your debt is paid by taking enough eth to pay back your btc debt (including transaction fees) and the remaining eth is returned to the account where your collateral is as profit.
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Your whole position is closed by trading all of your eth (not collateral) for btc. Your debt is then paid from that amount and the rest is returned to you as profit in eth. This would mean that you've paid transaction fees twice to convert eth to btc and then back to eth so that it matches your collateral currency.
Also, what happens if you close most of your position such that your whole debt is paid? E.g If you have a position of 1 eth and the price has moved so that 25% of that is profit. What will happen if you create a margin sell for .75 eth? Would you then have an open position of .25 eth which would all be profit? or would you have a closed order where the .25 eth profit was returned to you automatically? Clearly I misunderstand because neither of those scenarios make sense to me.
Thanks,
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