Enable Perpetual Futures Trading
- What is mark price?
- The mark price is designed to determine a fair market price by taking reference of spot index price plus a reasonable basis point. It is employed to calculate the UPL (unrealized profit & loss) of a position.
- UPL for long position = face value * no. of contracts / average opening price - face value * no. of contracts / latest mark price
- UPL for short position = face value * no. of contracts / latest mark price - face value * no. of contracts / average opening price
- Mark price = spot index price + moving average (basis).
- Basis = (futures highest bid + futures lowest ask) / 2 - spot index price
- What is margin maintenance ratio?
- The margin maintenance ratio is the lowest margin ratio required for the current position.
- The tiered margin system will place different risk limits depending on the position sizes. The required maintenance margin ratio depends on the positions a user holds: the larger the positions a user holds, the higher the margin is required and the lower the effective leverage will be available.
- For example, opening a BTC perpetual swap position of 10,000 contracts, which is on level 1 (0 – 19,999 contracts), requires a margin maintenance ratio of 1%, with maximum leverage of 40x.
- For a BTC perpetual swap position of 20,000 contracts, which is on level 2 (20,000 – 29,999 contracts), the requires margin maintenance ratio is 1% and the maximum leverage is 30x.
- In fixed-margin mode, when the margin ratio of a position goes below the required margin maintenance ratio, the position will be forced-reduced or forced-liquidated.
- In cross-margin mode, when the margin ratio of the account goes below the required margin maintenance ratio, the position will be forced-reduced or forced-liquidated.
- What is forced position reduction?
- Forced position reduction is one of the risk management tools adopted by OKEx to prevent market shock or considerable loss caused by a large forced-liquidation. When a users position reaches level 3 or above, if the margin ratio of the position goes below the required margin maintenance ratio of level 3 but still above that of level 1, the position will not be forced-liquidated at once. Instead, our system will calculate the position size required for level 1 and reduce the existing position to meet the level 1 requirement. Once the new margin ratio fulfills the required margin maintenance ratio, the forced position reduction will stop; otherwise, the reduction will continue.
- In fixed-margin mode, the position involved in forced position reduction will be frozen during the reduction process.
- In cross-margin mode, the token account of perpetual swap involved the reduction will be frozen during the process.
- How is the funding payment charged?
- For OKExs perpetual swap, a funding payment is charged between the buyer and seller of a contract every 24 hours. The calculation is as follows:
- Funding rate = Clamp (MA (((contracts best bid price + contracts best ask price)／2 - spot index price) / spot index price - interest), -0.25%, 0.25%)
- The system calculates the funding rate with the above formula every 24 hours. The funding payment will be charged with the funding rate calculated at the daily funding timestamp at 10:00 (CET).
- If the funding rate is positive, the longs pay the shorts the funding payment, and vice versa if the rate is negative.
- Funding payment = position value * funding rate
- What is the settlement process?
- All perpetual swap contracts are settled once a day at 10:00 (HKT) and 22:00(HKT) . The process is as follows:
- 1.PnL settlement + loss socialization
- The system transfers unrealized profit and loss (UPL) to realized profit and loss (PnL) and add the amount onto the PnL of the position. After the settlement, the UPL of a position will be calculated based on the new base price.Calculation of UPL on settlement day:UPL to settle = (contracts notional value * no. of contract / base price of the day) - (contracts notional value * no. of contract / base price of the previous day).Base price:If your position is not settled at the daily settlement timestamp at 10:00 (CET), the base price will be the average opening price.If your position is settled at the daily settlement timestamp, the base price will be the last trade price before contract settlement.
- The loss in forced liquidation is also settled at that time. If there is an outstanding loss which our insurance fund cannot cover, the amount will be socialized with all profiting users by deducting the amount from the profit.
- The remaining PnL on that day will be transferred to user’s account. In fixed-margin mode, the PnL amount will be transferred to the fixed margin of an open position. In cross-margin mode, the PnL amount will be transferred to the balance of perpetual swap account.
- 2.Funding payment settlement：
- The system calculates the funding payment automatically and settle the payable amount between the longs and shorts. The payment can be checked in account balance.
- In fixed-margin mode, when the account balance cannot cover the funding payment, the outstanding amount will be deducted from the fixed margin.
1.If you own 1 BTC but worry that the price of it may fall, you can __________ 1 BTC to hedge the downside risk.
2.If you want to open a 1 BTC-worth position with 10x leverage, you need __________ BTC as margin
3.The formula of unrealized profit and loss (UPL) is?
4.The higher the number of contracts in a position and margin tier, the __________ the margin maintenance ratio and the __________ the leverage available.
5.When a position is in the process of forced position reduction, can the user place or cancel orders?
6.When the funding rate is __________, the longs pay the shorts.
7.Forced liquidation is triggered when？
8.When can the profit of a closed perpetual swap be transferred out？
Congratulations, you have passed the quiz, you may now enable futures trading