Perpetual Swap Contract Trading Guide
Perpetual contract is a derivative product that is settled in USDT token. Traders enter either into a long (profit from upward trend) or short (profit from downward trend) position. Available leverage ranges from 1-100x (see contract specifications for more information).1-1. Differences between futures and perpetual contracts:
- Settlement Date: Perpetual Contracts have no delivery date and never expire, whereas futures contracts have a settlement date.
- Funding Rate: Since there is no delivery date, a funding mechanism is used to ensure that the Perpetual Contract price is anchored to the spot market price.
- Daily Settlement: A daily settlement process (at UTC Time 4:00, 12:00 and 20:00) moves Unrealized PnL into Realized PnL.
- Risk Limits: Minimum maintenance margin (MM) is the minimum amount a user needs to maintain the current position. When this requirement is violated (due to market movement), a auto-deleveraging or liquidation process will commence. Users with different position sizes require different MM. The bigger the position size, the higher MM needed, and the lower you can set your leverage at.
Underlying: Average prices for each coin are derived from exchanges
Multiplier : 1USDT, 0.0001 BTC base
Tick value (Minimum Change) : Varies by products
|Base||0.0001 BTC||0.01 ETH||1 EOS||0.01 LTC||0.01 BCH||1 XRP|
Index rates are calculated using average prices from major exchanges.
As described above, the index multiplier is 0.0001BTC per contract.
To ensure the spot index price accurately reflects the spot market price of each token, we have carefully selected the market prices of 3 or more major exchanges as the weighted index constituents for each token. Measures are introduced to handle abnormal situations. Weights are placed in the order of the exchange and the coin.2-2. Index Update Rules
If an exchange data source stops updating or is inactive for a long duration, we will temporarily remove it from the index calculation until it starts updating data again.
The number of active exchanges (deduced from a):
>=3 exchanges, weighted average index price of these active exchange prices ( If an exchange's price deviates 3% or above from all exchanges' median, then this exchange's price will be the median * 1.03 or median * 0.97)
= 2 exchanges, average of prices
= 1 exchange, that exchange price.
For XXX/BTC trading pairs in the index components, it will be multiplied by the Wisebitcoin BTC index and calculated accordingly.
* Wisebitcoin brings the highest level of liquidity from indices derived from various exchanges worldwide.
When a user’s position has been liquidated, the user’s remaining position will be taken over by the system. If the position cannot be executed at the liquidation price in the market, (This means there are not enough orders on the book) and the insurance fund is insufficient to cover the loss from this position, the Auto-Deleverage (ADL) mechanism will kick in. ADL will deleverage (closeout users’ positions) users with positions on the opposite side, and the deleverage queue is based on leverage and PnL.Detailed queuing formula:
A clawback mechanism distributes the loss to all users with profits in the platform according to position sizes. This mechanism occurs after settlement and transfers part of the user’s profit to share the losses; therefore, the profits of the position cannot be transferred out before a settlement.
The auto-deleverage mechanism prioritizes deleveraging users with high leverage and high profits. Since this mechanism is realized by closing out positions, profits can be transferred out at any time.
It is critical for traders to understand the Auto Deleveraging Mechanism before constructing high leverage/high risk portfolios.
Wisebitcoin set the position limit for managing the risk of the Perpetual Swap Contract Trading Guide. This measure is used to minimize a user’s position risk. When the high-tier risk limit of a user’s margin rate is insufficient, the user will be downgraded to a lower tier (close out partial position and lower maintenance margin rate). As users amass larger positions, they pose a risk to others on the exchange who may experience a deleveraging event if the position cannot be fully liquidated. If the user's position size is higher than the risk limit, then their order will fail. Users can adjust the risk limit in the trading interface; however, if a user’s margin does not meet the requirement for that level, the adjustment will fail.
Wisebitcoin’s current risk limit is as follows:
|Coin||Risk Limit||Maintenance Margin||Initial Margin||Max Leverage|
* Any changes to risk limits and leverage levels will be announced in advance.
The Insurance Fund is used to avoid an investor’s position being auto-deleveraged. This fund is used to change an unexecuted liquidation order’s price before the order is taken over by the auto-deleveraging system.
The Insurance Fund grows from liquidations that were able to be executed in the market at a price better than the liquidation price of that particular position.
Margin is a good-faith deposit or an amount of capital one needs to post or deposit to hold the position.
Position Margin = Initial Margin + added/removed margin
Initial Margin = multiplier * quantity * price / leverage
Leverage allows traders to enter a position that is worth much more by committing only a little amount of money. The gain or loss is, therefore, greatly magnified.
Suppose BTC is currently trading at 10,000 USDT, a user intends to enter 1,000 contracts into a long position with a leverage of 10.
The quantity of contracts opens = 1,000 contracts
Margin needed = Contract Multiplier * Quantity* BTC price / Leverage = 0.0001 * 1,000 * 10,000 /（10）= 100 USDT
Reminder: Higher leverage indicates a higher return, but also higher risks. Please make sure you understand the risk before you use high leverage.
Leverage: The leverage a user chose to open a position
Initial Margin Rate: 1/Leverage
Initial Margin = Contract Multiplier * Quantity * Average Open Price / Leverage-Fee
Maintenance Margin Rate (MMR): Minimum margin rate used to maintain the current position. A different maintenance margin rate may result in a different liquidation price. If the underlying index price reaches the liquidation price, the deleverage/liquidation procedure will be triggered.
The Maintenance Margin Rate is used to calculate the liquidation price.
Est. Liquidation Price (Long) = (Position Size (Num of contracts) * Contract Multiplier * Average Open Price + fee - Initial Margin)/((1-MMR) * Contract Multiplier * Position Size)
Est. Liquidation Price (Short) = (Position Size (Num of contracts) * Contract Multiplier * Average Open Price - fee + Initial Margin)/((1+MMR) * Contract Multiplier * Position Size)
Margin Rate = (Initial Margin + Unrealized PnL) / Open Value = (Initial Margin + Unrealized PnL) / (Position * Contract Multiplier * Average Price)
Suppose the latest contract price is 10,000USDT, one user enters 1,000 contracts (Tier 1 Risk Limit) into a LONG position with 10X leverage. The maintenance margin rate requirement for this position is 0.5%.
At this moment, the user’s Initial margin Rate = 1/10 = 10%
Margin = Contract Multiplier * Quantity * Average Open Price / Leverage= 0.0001 * 1,000 * 10,000/10=100 USDT
Est. Liquidation Price (Suppose fee=0) = (Position Size (Num of contracts) * Contract Multiplier * Average Open Price-Initial Margin)/((1-MMR) * Contract Multiplier * Position Size) = (1,000 * 0.0001 * 10,000 + 0 - 100)/((1-0.5%) * 0.0001 * 1,000)= 9,045.2261 USDT
If the latest contract price plunges to 9,045USDT and the underlying index price is 9,055.5USDT
Unrealized PnL = Contract Multiplier * Quantity * Latest Price – Contract Multiplier * Quantity * Average Open Price = 0.0001 * 9,045 * 1,000 - 0.0001 * 10,000 * 1,000 = -95.5
Then the Margin Rate = (Margin + Unrealized PnL) / Position Value =（100 - 95.5 ）／（9,045 * 0.0001 * 1,000）= 0.49748% < 0.5%
Since the index price did not reach the liquidation price, the position will not be deleveraged/liquidated.
Users can increase or decrease the margin for all positions; this will help manage risks. Leverage and liquidation prices will change automatically after the changes are made.
Currently, only cross margin mode is available, full margin mode is not available at this time.
Under cross margin mode, every position’s margin will be independent from other positions.
Cross Margin: Leverage levels are determined for each contract (adopted by Wisebitcoin)
Full Margin: Single leverage applied at the account level (Currently unavailable)
A user can open or close positions according to the market trend at their own will and at any given point of time.
Realized PnL is profit and loss for closed positions.
Contract Realized PnL:
Buy (Long): Contract Realized PnL = (Average Close Price - Average Open Price) * Quantity * Contract Multiplier.
For example: If some user opened 100 contracts long at an average open price of 800 USDT/BTC, then closed the position at an average close price of 1,600 USDT/BTC. Then the realized PnL for this position = (1,600 - 800) * 0.0001 * 100= 8 USDT.
Sell (Short): Contract Realized PnL = (Average Open Price - Average Close Price) * Quantity * Contract Multiplier.
For example: If some user opened 100 contract short at an average open price of 800 USDT/BTC, then closed the position at an average close price of 1,600 USDT/BTC. Then the realized PnL for this position = (800 - 1,600) * 0.0001 * 100 = - 8 USDT.
Contract Unrealized PnL:
Unrealized PnL is profit and loss for unclosed positions.
Buy (Long): Contract Unrealized PnL = (Latest Price – Average Open Price) * Position Size (Num of Contracts) * Contract Multiplier.
For example: If some user opened 100 contract long at an average open price of 500 USDT and the latest price is 600 USDT. Then the unrealized PnL = (600 - 500) * 100 * 0.0001 = 1 USDT.
Sell (Short): Contract Unrealized PnL = (Average Open Price – Latest Price) * Position Size (Num of Contracts) * Contract Multiplier.
For example: If some user opened 100 contract short at an average open price of 500 USDT and the latest price is 600 USDT. Then the unrealized PnL = (500 - 600) * 100 * 0.0001 = -1 USDT.
The primary mechanism to tether the Perpetual contract price to the spot price is Funding. Funding occurs every 8 hours at 04:00, 12:00, and 20:00 (UTC Time). You will only pay or receive funding if you hold a position at one of these times. If you close your position prior to the funding exchange, you will not pay or receive funding.8-2. Funding Rate Calculation
Funding = position value * funding rate
When the funding rate is positive, long pays short. Vice versa if it is negative.
When the funding occurs, we prioritize the fee to be charged from the position margin. If the position margin is insufficient (funding fee will continue to be charged until the user’s maintenance margin rate is equal to the minimum), the remaining amount will be deducted from the user’s available balance.
The platform does not charge any fees on funding; it is exchanged directly between traders.
Suppose a trader opened 100 contracts long at 8:11 AM (UTC) at 10,000USDT.
At 10:20, the trader closes the position, then he/she will not be charged a funding fee.
At 12:00, the trader still holds a position. Suppose the BTC price at that time is 10,024 USDT and the Funding Rate is 0.025%. Therefore, the trader will need to pay position value * funding rate = (10,024 * 100 * 0.0001) * 0.025% = 0.02506 USDT as funding fee to the opposite side (if the funding rate is negative, the short side will pay the long side).
You can find all your orders under "Order History". All orders can be canceled in “Open Orders” before they are executed.
"Margin" only includes the amount required for the unfilled orders, while "Fee" only includes the fee required for the filled orders.
- Limit Order: Order with a set price and quantity
- Market Order： Order with a set quantity. Market orders will be executed with a price that is 1 ± x% (adjusted based on market condition) of the last price. If the order is not immediately executed, it will be cancelled.
- Opponent Price：Order with a set quantity and the opposing side’s best bid/ask price. If the order quantity is larger than the opposing side’s best bid/ask quantity, then only part of the order will be executed, the rest will be left on the orderbook.
- Queue Price： Order with a set quantity and the same side’s best bid/ask price.
- Over Price： Order with a set quantity and the opposite side’s best bid/ask price ± x (adjusted based on market condition).
Open Long: Buy to open a long position, you will profit from upward trends
Open Short: Sell to open a short position, you will profit from downward trends
Close Long: Sell to close your previous long position.
Close Short: Buy to close your previous short position.
When the market price reaches trigger price, the order will be in effect
Suppose BTC is trading at 10,000 USDT, the user put down a stop-limit order with 9,500 USDT trigger price and 9,450 USDT order price, the order quantity is 100. When BTC price declines to 9,500 USDT, this order will be in effect and appear on the orderbook as a limit order.
Good Till Cancelled: The order is effective until cancelled
Fill or Kill: The full order will be filled, or else the order will be cancelled.
Immediate or Cancel: The order will be filled immediately; then the rest will be cancelled.
Post-only: Order will not be executed immediately; if your order will be executed upon entry, this order will be cancelled.