Overview of Perpetual Contracts
A perpetual contract is a type of derivative that is similar to a futures contract but with key differences:
- No Expiration or Settlement Date: Unlike futures, perpetual contracts do not have a specific delivery or settlement date.
- Similar to a Margined Spot Market: Perpetual contracts trade at prices close to the underlying reference index price. The mechanism used to peg the contract price to the spot price is known as the funding fee.
Trading Mechanism of Perpetual Contracts on Hibt
When trading perpetual contracts on Hibt, in addition to understanding margin trading, traders should be aware of the following points:
1. Mark Price
The mark price is the reasonable price used for perpetual contracts. It is adjusted based on the index price and determines unrealized profits and losses as well as the liquidation price.
2. Initial Margin and Maintenance Margin
- Initial Margin: This is the required margin amount to open a position.
- Maintenance Margin: This margin level determines the price at which forced liquidation will occur.
3. Funding Fees
Funding fees are exchanged directly between long and short positions every 8 hours. If the rate is positive, longs pay shorts; if negative, shorts pay longs. Users are only required to pay or receive the funding fee if they hold a position at the funding timestamp.
Funding Timestamps are at:
- UTC 00:00 (08:00 Beijing Time)
- UTC 08:00 (16:00 Beijing Time)
- UTC 16:00 (00:00 Beijing Time)
Funding Fees Calculation
Funding Fee = Position Value × Funding Rate
The funding rate consists of two parts: the interest rate and the premium index.
Hibt calculates the premium index (P) and the interest rate (I) every minute, then calculates the weighted average of these values over N hours.
Funding Rate Formula:
Funding Rate (F) = Premium Index (P) + clamp(Interest Rate (I) - Premium Index (P), a, b)
Where N represents the funding time interval. If funding fees are charged every 8 hours, N = 8; if every 1 hour, N = 1.
- If (I - P) falls between a and b, then F = P + (I - P) = I. In other words, the funding rate equals the interest rate in this case.
The interest rate (I) is 0.01%.
For more details on funding rates for different contracts, please refer to the platform.
Index Price
The index price reflects the market consensus on the value of the underlying asset. It is a weighted average price derived from several spot exchanges.
Overview of the Mark Price
The mark price is used to trigger liquidations and calculate unrealized profits and losses. However, it does not affect the trader’s actual realized profits and losses. Only when the mark price reaches the liquidation price will a trader’s position be liquidated.
Mark Price Calculation Formula:
Mark Price = Index Price + N-minute Moving Average
- N-minute Moving Average = Moving average of (Best Ask Price + Best Bid Price) ÷ 2 - Index Price, sampled every second over N minutes.
Important Notes
After your order is executed, you might see immediate unrealized profits or losses. This happens due to slight differences between the mark price and the execution price. However, this does not reflect actual gains or losses at that moment.
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