Perpetual futures are digital currency derivatives launched by BiKing Exchange with USDT futures as the pricing unit and settlement unit. Currently, the futures supports long-short two-way positions and provides multiple leverage. The perpetual futures will not be settled, and the fund fee mechanism will be used to keep the price in sync with the spot market to the greatest extent. Use a reasonable mark price to calculate unrealized profit and loss and liquidation price to avoid frequent unnecessary liquidation caused by market fluctuations. The purpose of this futures is to replicate the market conditions of the spot market while allowing high leverage.
2. Futures definition
Example of opening a position, taking the BTCUSDT futures as an example:
Q: How is the BTCUSDT futures quoted?
A: The underlying price of the BTCUSDT futures is BiKing Index. The underlying price and the price of the perpetual futures are quoted in USDT, and all margins and profit and loss are denominated in USDT.
Traders who want to profit from a rise in the BTC/USD index will go long BTCUSDT perpetual futures. Conversely, traders who think it will drop in value will short the perpetual futures.
When the price of Bitcoin was 5,000 USDT, Xiao Chen went long by 100 BTC, that is, he bought 100BTC/0.001BTC/futures = 100,000 futures, and the futures price rose to 6,000 USDT a few days later.
The investor's profit will be: 100000* 0.001 * (6,000 – 5,000) = 100,000USDT
3. Fee rate
The perpetual futures fee is:
4. Calculation of marked price
The calculation of the mark price has a strong relationship with the funding rate
Calculation of price mark
1. The mark price of the perpetual futures will be calculated using the basis rate of funding costs and the price index
2. Funding fee basis rate = Funding fee rate * (Time until the next funding fee payment / Funding fee time interval)
3. Mark price = index price * (1 + basis rate of fund cost)
Since unrealized profit and loss is the main reason for forced liquidation (forced liquidation), and the maximum leverage of perpetual futures can reach 125 times, it is very important to accurately calculate position profit and loss to avoid unnecessary liquidation. The intrinsic value of the futures is the core basis of the perpetual futures. The price index is obtained by referring to the weighted average of prices in major mainstream trading markets, and the price index is the main component of the marked price.
For the price index of the U-standard futures, please refer to: Price Index
Price Index Calculation Rules
The perpetual futures price index is a comprehensive price index obtained by referring to the prices of a basket of major spot trading markets and weighted averages based on their trading volume. Reference trading markets include: Huobi, Biance,Okex, Bittrex, HitBTC, Gate.io, Bitmax, Poloniex, FTX, MXC.
Its specific price weighting will be changed periodically based on volume and we have some additional safeguards in place to avoid poor market performance due to interruptions in spot market prices or due to connectivity issues. These safeguards include:
Single price source deviation: When the latest price of an exchange deviates from the median price of all price sources by more than 5%, the price weight of this exchange will be set to zero.
Exchange connection issue: If an exchange does not update transaction data within 10 seconds, the weight of this exchange will be zero when calculating the weighted average.
The price index can be regarded as a fair spot price, which we use to calculate the mark price (for further calculation of the unrealized profit and loss of each futures). Please note that the actual profit and loss of the account is based on the market price of the transaction when the position is closed.
The mark price formula of the perpetual futures is as follows:
Mark Price = Median* (Price 1, Price 2, futures Price)
Price level 1 = price index* (1 + funding rate *(time from next funding rate collection (hours)/8))
Price Level 2 = Price Index + Moving Average (30-minute basis)*
*Moving average (30-minute basis) = moving average ((Bid1 + Ask1) / 2-price index), with 30-minute intervals, sampling values every minute.
*Median: price 1, price 2, and the futures price take the middle one, for example, price 1 < price 2 < futures price, then the mark price is price 2.
Please note that due to possible extreme market conditions or price source deviations, resulting in a large deviation between the spot price and the mark price, Biking Exchange will take additional protection measures, and at this time will directly use price 2 as the mark price.
Compared with the price of perpetual futures with large short-term price fluctuations, the mark price can better predict and reflect the intrinsic value of the futures. We use this mark price to avoid unnecessary forced liquidation of customers and to prevent any market manipulation.
5. Capital costs
Purpose of Funding Fee
Through the cost compensation method between long and short positions, the firm price can better track the index price.
BiKing Exchange does not charge any funding fees; funding fees are charged between users.
Collection method: The funding fee is swapped between long and short positions every 8 hours, at UTC+8 00:00, UTC+8 8:00 and UTC+8 16:00. Funding fees will only be charged or paid if the position is held at these points in time. If the position is closed before the fee time, then no funding fee will be charged or paid.
When the funding rate is positive, longs pay shorts. When the funding rate is negative, shorts pay longs. When holding a position in both directions, only the funding fee for the naked position is calculated.
Funding Fee Calculation
Funding fee = position notional value * funding rate
The value of your position has nothing to do with leverage. For example, if you hold 100 BTC perpetual futures, funds will be charged/paid for the notional value of those futures, not based on how much margin you have allocated for the position.
Funding Rate Calculation
Funding rate (F) = premium index (P) + clamp (interest rate (I) - premium index (P), 0.05%, -0.05%)
Premium Index (P) = ( Max ( 0 , depth-weighted bid price - mark price) - Max ( 0 , mark price - depth-weighted ask price)) / spot price + reasonable basis of mark price
Interest rate (I) = (pricing interest rate index - base interest rate index) / funding rate interval
6. Take Profit
The default take profit level is set to 1000%. In a long position, the take profit will be triggered automatically when the asset price rises to 10 times the purchase price, or in a short position, when the asset price falls to one-tenth of the purchase price.
7. Forced liquidation
BiKing exchange perpetual futures provide higher multiple leverage. In order to maintain positions, investors must pay attention to the risk rate.
When the risk rate is lower than 10%, the user's position will be forced to close.
The calculation method of the risk rate is: risk rate = position funds / opening margin
When the user has a total of 10,000 USDT in full positions, and then uses 1,000 USDT margin to open long positions with 100 times leverage, the current risk rate = 10,000/1,000 = 1,000%
When the market falls, the account funds lose to 100U
The current risk rate = 100/1000 = 10%, at this time a forced liquidation will be triggered.
In order to minimize liquidation events
Biking Exchange uses price markup to avoid forced liquidation due to lack of liquidity or market manipulation.
8. through the warehouse
When the market fluctuates violently, there may be a liquidation behavior. When the liquidation actually occurs, the BiKing Exchange futures Risk Protection Fund will intervene to guarantee the maximum loss for the user as the account is 0.
In the cross-margin mode, if the user has a position loss, the user's cross-margin account assets will be 0.
In the isolated-margin mode, when a single order is overwhelmed, the maximum loss of the order is the order margin, which is also regarded as 0 after the forced liquidation of this order, and the negative value is not counted.