Overview of Perpetual Contract
Perpetual Swap refers to a kind of derivative that is similar to traditional futures contract and can provide high leverage. It differs from traditional futures contract in the following aspects:
- No delivery date: perpetual contract doesn’t have expiration time, so it doesn’t any limit on position-holding duration;
- Anchored spot market: in order to guarantee tracking underlying price index, perpetual contract ensures that its price follows the price of underlying asset through the mechanism of funding cost;
- Reasonable price marking: perpetual contract adopts reasonable price marking method to avoid forced liquidation due to lack of liquidity or manipulation of the market;
- Auto deleveraging (ADL) mechanism: perpetual contract uses ADL mechanism instead of account sharing mechanism to deal with the losses caused by force liquidation of big positions.
|
Item |
Perpetual Swap |
Traditional Contract |
|
Margin |
USDT, monetary base |
Monetary base |
|
Settlement Date |
No |
Specific date per week, month, quarter, etc. |
|
Leverage |
10x, 20x, 50x, 100x |
20x at most |
|
Loss Mechanism of the Contract |
ADL mechanism |
Shared by all accounts |
|
Forced Liquidation Price |
Reasonable price index |
Last trading price |
|
Price Equilibrium Mechanism |
Funding cost rate |
Regular delivery |
Market Mechanism of Perpetual Contract
Traders need to understand several mechanisms of perpetual market when trading perpetual swap. They should pay attention to the following key parts:
- Position marking: perpetual contract adopts reasonable price marking Marked price determines unrealized profit/loss and force liquidation price.
- Initial margin: initial margin decides the leverage that you can use to open a position.
- Maintenance margin: maintenance margin is the margin level required to maintain the minimum level of your position.
- Funding cost: buyers and sellers pay funding cost regularly, i.e. every 8 hours. If the rate is positive, long positions pay funding cost to short positions. If the rate is negative, short positions pay funding cost to long positions.
Please note that,
You only need to pay or collect funding cost if you hold a position at funding timestamp.
Timestamp of funding cost: UTC 4:00(UTC+8 12:00), UTC 12:00(UTC+8 20:00) and UTC 20:00(UTC+8 04:00)
Traders can see the current funding cost rate on the market in the index column of funding cost rate on trading page.