Activate Perpetual Swap Trading
Dear user, to make sure that you possess the necessary skills for managing risks of your funds, you will need to pass the quiz before activating derivatives trading.
- 1. Introduction to OKEx Perpetual Swap
- OKEx Perpetual Swap is a crypto asset derivative product that is settled in crypto assets such as Bitcoin (BTC). Each contract has a Face Value of USD100-worth of BTC, or USD10-worth of another asset (e.g. LTC, ETH, etc.). Traders can long or short a position to profit from the increase or decline of the asset's price, or manage their investment risks by hedging.
- In perpetual swap trading, traders only need to pay a small amount of margin according to the ratio of the contract position value to trade higher-value contracts. Traders can therefore make use of different tools to increase their profit, which also involves greater risks.
||BTC (or other assets, e.g. LTC)/USD Index
||USD1 per point
||BTC: USD100; other assets, e.g. LTC: USD10
||A tiered maintenance margin ratio system is implemented according to the number of contracts held.
||There is no delivery date and expiry date in perpetual swap trading.
||Every 24 hours (09:00 CET, UTC+1)
- 2. Features of Perpetual Swap
- 1. Expiry date: There is no delivery date and expiry date in perpetual swap trading.
- 2. Funding: As there is no expiry date, a "funding" mechanism is used to anchor the perpetual swap price to spot market price.
- 3. Mark price: It is used to calculate the unrealized profit and loss (UPL) of a user and to lower the risk of liquidation caused by abnormal market volatility.
- 4. Settlement every 24 hours: Through the settlement every 24 hours at 09:00 (CET, UTC+1), users’ UPL will be transferred to realized profit and loss' (RPL), which allows better flexibility in fund usage.
- 3. What is mark price?
- Mark Price provides a reasonable reference price based on spot index price and the moving average of basis. It helps to minimize negative impacts caused by abnormal volatility in the perpetual swap market.
- In normal market condition, mark price is equal to the last traded price of perpetual swap.
- 4. How to calculate profit and loss?
- 1. Realized profit and loss (RPL)
- the profit/loss generated by closing a position before delivery or settlement.
- Long side: RPL = (Face value / settlement price – face value / average closing price) * number of contracts closed
- Short side: RPL = (Face value / average closing price – face value / settlement price) * number of contracts closed
- E.g. A user opened 2 BTC long positions at settlement price 500 USD/BTC, then closed 1 position at 1000 USD/BTC. The RPL of contract will be = (100 / 500 - 100 / 1000) * 1 = 0.1 BTC
- 2. Unrealized Profit and loss (UPL)
- The profit/loss generated by a position that has yet to be closed.
- All UPL will be settled and credited to user balance at the settlement time. The UPL will then be reset.
- 5. What are margin ratio and maintenance margin ratio (MMR)?
- 1. Margin ratio
- Fixed-margin mode: margin ratio = (fixed margin + UPL) / position value
- Cross-margin mode: margin ratio = (Balance + RPL + UPL) / (position value + order margin * leverage level). Order margin is the margin that is on hold for pending orders.
- Position value = face value * number of contracts / latest mark price
- 2. Maintenance margin ratio (MMR)
- Maintenance Margin Ratio (MMR) is the lowest required margin ratio for a user to maintain the current open position(s). It is adopted to avoid the liquidation of large positions, causing big impact on market liquidity. Basically, the larger the positions held, the higher MMR will be required, and the lower the leverage will be available.
- Below is the tiers for BTC perpetual swap trading:
|OKEx BTC Perpetual Swap Tiers
||Min amt. of contracts
||Max amt of contracts
||Maintenance margin ratio
||Max. leverage level
- For example, if one holds 1,500 BTC perpetual swap contracts, he is in tier 2 (1,000 – 9,999) and his MMR is 1.00% and maximum leverage level is 50x. If one hold 20,000 BTC perpetual swap contracts, he is in tier 4 (15,000 – 24,999) and his MMR is 2% and maximum leverage level is 20x.
- In fixed-margin mode, when the margin ratio of a position is lower than the MMR, partial or full liquidation occurs.
- In cross-margin mode, when the margin ratio of an account is lower than the MMR, partial or full liquidation occurs.
- 6. What is partial liquidation?
- A partial liquidation system is introduced to avoid market impacts caused by liquidation of large positions and margin call losses. If one’s position is in tier 3 or above and the margin ratio of his position falls below the MMR but is above the MMR of tier 1, his position will not be fully liquidated. The system will calculate the number of contracts that has to be closed to reach 2 tiers lower and partially liquidate the position. After that, if the margin ratio can meet the MMR of the new tier, partial liquidation will stop. Otherwise, the partial liquidation process will continue until the MMR requirement is met.
- In fixed-margin mode, during partial liquidation, the position will be frozen and no related operations can be executed
- In cross-margin mode, during partial liquidation, the account will be frozen and no related operations can be executed
- 7. When will liquidation be triggered?
- When a user's maintenance margin ratio tier is 2 or below and his maintenance margin ratio falls below the tier's required level, or when a user's maintenance margin ratio tier is 3 or above and his maintenance margin ratio is less than the requirement of tier 1, the contract (in fixed-margin mode) or position (in cross-margin mode) will be closed at its bankruptcy price (at which margin = 0) and taken over by the liquidation engine. This is to avoid market impacts caused by cascade liquidation and clawback (losses caused by unfulfilled liquidated positions) under volatile market conditions.
- 8. Why the profit cannot be transferred out after closing a position?
- The system's liquidation loss is calculated at 09:00 (CET, UTC+1). After the settlement is complete, the profit can be transferred out.
- 9. What is funding?
- The "funding" mechanism is used to anchor the perpetual swap price to spot market price.
- Funding occurs every 8 hours, at 01:00 ,09:00 and 17:00 (CET, UTC+1). If you close your position prior to the funding time, then you will not pay or receive funding fee.
- Funding = position value * funding rate (The funding rate is determined by the difference between contract price and spot index price during the period of last and current settlement time)
- When the funding rate is positive, longs pay shorts. When it is negative shorts pay longs. (OKEx does not charge any fees in the funding process. Funding fees are exchanged directly between traders.)
Congratulations, you have passed the quiz, you may now activate the derivatives trading.
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