Perpetual Swap Contract Trading Guide
A perpetual contract is a derivative product that is settled in digital tokens such as Bitcoins (BTC). Traders enter either into a long (profit from upward trend) or short (profit from downward trend) position. Available leverage ranges from 1-100x.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), an 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.1-2. Contract Specification
Underlying: Average prices for each coin are derived from exchanges
Multiplier: 1USDT, 0.0001 BTC base
Tick value (Minimum Change): Varies by product
Leverage: 1~1001-3. Fee Structure: 0.07% Coin Margin Perpetual Swap
|Multiplier||1 USDT||1 USDT||1 USDT||1 USDT||1 USDT||1 USDT|
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 placed in the order of exchange and 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 Wisebitcoin BTC index and calculated accordingly.
* Wisebitcoin brings the highest level of liquidity from indices derived from various exchanges worldwide.
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).3-3. How to place an order?
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.
Users are required to choose a risk limit. This measure is used to minimize users’ position risk. When high-tier risk limit user’s margin rate is insufficient, the user will be downgraded to 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 users position size is higher than the risk limit, then his/her order will fail. User can adjust the risk limit in the trading interface; however, if user’s margin does not meet the requirement for that level, the adjustment will fail.
Wisebitcoin risk limits are as follows:
|Coin||Risk Limit||Maintenance Margin||Initial Margin||Max Leverage|
* Any changes to the risk limits and leverage levels will be announced in advance.
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 / （leverage * price）
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 10,000USDT, a user intends to enter into a position worth 1BTC with leverage of 10.
The quantity of contracts opens = 1 BTC * 10,000 USDT per BTC / Multiplier= 1 * 10,000 / 1 = 10,000
Margin needed = Multiplier / (BTC price * Leverage) = 1 * 10,000 / (10,000 * 10) = 0.1 BTC
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 user chose to open a position
Initial Margin Rate: 1/Leverage
Initial Margin = Multiplier / (Average Open Price * Leverage)-Fee
Maintenance Margin Rate (MMR): Minimum margin rate used to maintain the current position. Different maintenance margin rate may result in different liquidation price. If the underlying index price reaches the liquidation price, the deleverage/liquidation procedure will be triggered.
Maintenance Margin Rate is used to calculate liquidation price,
Est. Liquidation Price (Long) = (1 + MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) - fee + Position Margin)
Est. Liquidation Price (Short) = (1 - MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) + fee - Position Margin)
Margin Rate = (Initial Margin + Unrealized PnL) / Position Value = (Initial Margin + Unrealized PnL) / (Position * Multiplier / Last Price)
Suppose the latest contract price is 10,000 USDT, one user enters into a 10X leverage LONG position worth 1 BTC, which equals 10,000 contracts (Tier 1 Risk Limit). The maintenance margin rate requirement for this position is 0.5%.
At this moment, user’s Initial margin Rate = 1/10 = 10%
Margin = Multiplier * Quantity /(Average Open Price * Leverage)= 10,000 * 1 / (10,000 * 10) = 0.1 BTC
Est. Liquidation Price (Suppose fee=0) = (1 + MMR) * Position * Multiplier / ((Position * Multiplier / Average Price) - fee + Position Margin) = （1 + 0.5%）* 10,000 * 1 / （（10,000 * 1 / 10,000)）- 0 + 0.1） = 9,136.36 USDT
If the latest contract price plunges to 9,135 USDT and the underlying index price is 9,138 USDT
Unrealized PnL = Multiplier * Quantity / Average Price – Multiplier * Quantity / Latest Price =
1 * 10,000 / 10,000 - 1 * 10,000 / 9,135 = -0.09469
Then the Margin Rate = (Margin + Unrealized PnL) / Position Value =（0.1 -0.09469）／（1 * 10,000 / 9,135）= 0.00485 = 0.485%
Since the index did not reach the liquidation price, the position will not be deleveraged/liquidated.
Users can increase or decrease the margin in all positions, this will help manage risks. Leverage and liquidation price will change automatically after the changes were made.
Currently, only cross margin mode is available, full margin mode is not available at this time.
Under cross margin mode, every position margin will be independent from other positions.
Transfer: Transfer cash between among accounts (spot, option, futures)
Margin: Margin used for the position, this your initial margin.
Order Margin: Margin for unfilled orders, including fees and position margin
Realized PnL: Profit and loss gained by closing positions. It can be used as margin or transferred out to other accounts.
Unrealized PnL: Current profit and loss for all holding positions on this contract.
Direction: Buy (Long) or Sell (Short)
Leverage: Actual leverage for current position
Position: Number of contracts opened
Position Value: Contract Multiplier * Position / Latest Price
Position Margin: Margin for the position, frozen. It will move with the market. You can add or remove margin at any given time.
Average Price: Average price for opening the position
Liquidation price: Index Price at which the position will be forcedly liquidated
Margin Rate: Position Margin / Position Value
Index Price: Token index price (weighted average price of several leading markets).
Unrealized PnL: Profit and loss for all current holding positions. Note: This unrealized PnL is only for the current position, not for all positions.
Closing types are: Market order, Limit Order, Opponent Price, Queue Price, Over Price. For detailed information regarding order types, please see ‘Order management’
User can open or close positions according to the market trend at their own will at any given point of time.
Contract Realized PnL:
Realized PnL is profit and loss for closed positions.
Buy (Long): Contract Realized PnL = (Contract Multiplier / Average Open Price– Contract Multiplier / Average Close Price) * Quantity.
For example: If some user opened 100 BTC long contracts 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 = (1/800-1/1,600) * 1 = 0.0625 BTC.
Sell (Short): Contract Realized PnL = (Contract Multiplier / Average Close Price– Contract Multiplier / Average Open Price) * Quantity.
For example: If some user opened 100 BTC short contract 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 = (100/1,600-100/800) * 1 = -0.0625 BTC.
Contract Unrealized PnL:
Unrealized PnL is profit and loss for unclosed positions.
Buy (Long): Contract Unrealized PnL = (Contract Multiplier/ Open Price – Contract Multiplier/Latest Price) * Position.
For example: If some user opened 6 BTC long contract at an average open price of 500 USDT/BTC and the latest price is 600 USDT/BTC. Then the unrealized PnL = (1/500 – 1/600) * 6 = 0.002 BTC.
Sell (Short): Contract Unrealized PnL = (Contract Multiplier / Latest Price– Contract Multiplier/ Open Price) * Position.
For example: If some user opened 1 BTC short contract at an average open price of 500 USDT/BTC and the latest price is 600 USDT/BTC. Then the unrealized PnL = (1/600 – 1/500) * 6 = -0.002 BTC.
The primary mechanism to tether Perpetual contract price to 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, then you will not pay or receive funding.7-2. Funding Rate Calculation
Funding = position value * funding rate
When the funding rate is positive, longs pay 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 10,000 contracts long at 8:11 AM at 10,000USDT.
At 10:20, the trader closes the position, then he/she will not be charged for funding fees.
At 12:00, the trader still holds a position. Suppose the BTC price at that time is 10,024USDT and the Funding Rate is 0.025%. Therefore, the trader will need to pay position value * funding rate = (10,000 / 10,024 ) * 0.025% = 0.00025 BTC as funding fee to the opposite side as funding fee (if the funding rate is negative, the short side will pay the long side).
Formula for calculating Coin-Margin Perpetual Contract:
Contract Multiplier * Amount (Contracts) * Fee Rate / Execution Price
(Details on Contract Multiplier can be found in the Introduction Chapter)
John Doe opened 100 contracts LONG at the price of 8,000 USDT (contract multiplier is 1USDT). Suppose his fee rate is 0.05%, then this trade’s fees will be 1USDT * 100 * 0.05%/ 8,000 USDT/BTC = 0.00000625 BTC
Fees for coin margin contracts is the underlying asset of the contracts. (E.g. BTC Coin Margin Perpetual Contract trading fees will be charged in BTC, LTC Coin Margin Perpetual Contract trading fees will be charged in LTC)