USDT swap contract term explanation – Future

Account equity

Cross position account equity = available balance + position margin + frozen margin

Fixed position account equity = available balance + position margin + unrealized profit and loss + frozen balance

Initial margin

The minimum margin required to be paid when a trader opens a position, and the initial margin rate (open position value/position margin) also represents your leverage multiple.

Maintenance margin

The minimum margin required to maintain a position. When the margin is lower than this percentage, a liquidation event or a partial liquidation event will be triggered.

Cross Margin

Cross margin refers to the use of all available balance in the contract account as margin to avoid liquidation. The realized profits of any other positions (including other cross-trading pairs) can help increase margin on losing positions. That is, the margin is shared between positions. When needed, the position of a contract will withdraw more margin from the account balance to avoid liquidation.

For a cross position, the liquidation price is not fixed because multiple trading pairs share the margin. Whether to liquidate a position or not, you need to refer to the overall position risk rate. If the overall position risk rate is lower, the less likely it is to liquidate the position. The higher the overall position risk rate, it is approximately close to liquidation. When the risk rate of the whole position reaches 100%, all positions of the cross position will trigger a liquidation.

Cross position risk rate = ∑all the maintenance margin of the cross positions / (available balance + ∑all the holding margin of the cross positions + ∑all unrealized profit and loss of the cross positions）*100%

Increasable margin

Increasable margin = available balance of contract account

Reducible margin

Reducible margin = MAX [position current margin-(position value / current user set leverage multiple + reserved funds), 0]

Fixed Margin

Fixed margin means that the margin allocated to a certain position when a position is opened is controlled within a certain amount. If the margin of the position is lower than the maintenance margin level, the position will be liquidated. Through the fixed margin mode, you can limit your maximum loss to the initial margin used by the position.

Please note that under turbulent market conditions, you may experience liquidation more quickly due to insufficient margin. When a position is liquidated, any of your available balance will not be used to increase the margin of this position.

Open Position Cost

The total frozen assets required by a trader to open a position include the initial margin for opening a position and possible transaction fees.

Actual Leverage

The current position contains unrealized profit and loss leverage.

Perpetual Futures Index Price

Perpetual Futures Index Price is obtained by taking the median of spot prices of Future, Huobi, OKex, and Binance, and then taking the weighted average value through the algorithm.

Mark price

The calculation of the mark price is based on the index price, and the mark price is used to calculate the forced liquidation and ADL.

The hybrid contract uses a reasonable mark price to avoid unnecessary forced liquidation of investors, and the reasonable mark price is determined by market liquidity. All forced liquidation, ADL, etc. adopt the mark price method.

Mark price = index price * （1 + Funding expense basis rate）

Funding basis rate = funding rate * （Time until the next fund rate collection H / 8）

It is calculated as 1 hour if the time H is less than 1 hour before the next fund rate collection time.
Update frequency: update every 1 second.

Latest transaction price

In the current market, both buyers and sellers participate, and fair and reasonable transaction prices determined by market supply and demand are matched by the system.

Transaction Type

The biggest difference between contract trading and ordinary trading is that perpetual contract can be traded in both directions, that is, long or short.

Long

It means that you are long on the current contract. At this time, the user can choose to buy and hold at a fixed price. After the match is successful, the long position will be increased.

Short

It means that the user is not optimistic about the current contract, and there may be a risk of falling in the market outlook. At this time, the user can choose “short”, and the short position will be increased after the match is successful.

When closing a position, the user only needs to select the close button to close the short/long position.(Note: closing a position will not add a new position)

Price-limit Order

The user enters the specified order price and quantity, and limit orders can also be used when closing a position.

Note：The order price must comply with the price limit mechanism.

BBO Order

The price of BBO order is based on the user's counterparty price, and the user only needs to enter the quantity.

Position

When the user's order is completed, the user's position information can be seen in the position, and each contract supports simultaneous holding of long and short positions.

For example: you open a long 1BTC contract, and then you open a 0.5BTC short contract, then you will have a long position of 1 BTC and a short position of 0.5 BTC.

Unrealized profit and loss of short positions

=Open position value-current position value

=Opening price * holding amount-latest transaction price * holding amount

Unrealized profit and loss of long positions

=Current position value-open position value

=Latest transaction price * holding amount -open price * holding amount

Realized profit and loss for short positions

=Value of open position-value of closed position

=Opening price * holding amount -Closing price * holding amount

Realized profit and loss for long positions

=Closed position value-open position value

=Closing price * holding amount -Opening price * holding amount

Funding

Term explanation：

Funding are exchanged between the long and short parties of the perpetual contract.

If the funding rate is positive, longs will pay and shorts will receive funding, and vice versa if the rate is negative.

Funding exchange occurs every 8 hours at 00:00,08:00 and 16:00 UTC+8. You will only pay or receive funding if you hold a position at one of these Funding Timestamps.

Calculation：

Funding = position value * funding rate

Funding rate

Funding rate is assigned to the value according to the Funding Rate Sheet after the Premium Index is calculated. The funding rate calculated at current Funding Timestamp will be used for next funding period.

Premium Index = MA(Max(0, Impact Bid Price - Index Price)-Max(0,Index price- Impact Ask Price) / Index Price,60 min)

Impact Bid Price = The average fill price to execute the Impact Margin Notional on the Bid side

Impact Ask Price = The average fill price to execute the Impact Margin Notional on the Ask side

Funding rate = premium index + Clamp (0.01% - premium index, -0.03%, 0.03%)

The maximum limit of funding rate is 0/75%, the minimum limit being -0.75%

Note: Clamp(x, a, b) means when x is within the range between a and b the forumula produces x; when x is less than a the forumula produces a; when x is more than b the forumula produces b.

Leverage

The leverage that users can use in contract transactions can be selected from 1 to a maximum of 100 times.

*Note: The higher the leverage, the higher the return and the higher the corresponding risk.

Risk rate

Risk rate = margin rate = maintenance margin / margin balance

The higher the margin rate, the easier it is to liquidate the position. When the margin rate is 100%, all positions will be forced to liquidate.

Liquidation

According to the liquidation price, liquidation price = forced liquidation price.

Long: when the mark price is less than or equal to the liquidation price, liquidation is triggered

Short: when the mark price is greater than or equal to the liquidation price, liquidation is triggered

Note：

Cross margin liquidation mechanism, according to the marked price, check every 5s.
When a cross margin account is liquidated, all positions of cross margin trading pair will be liquidated together.

Fixed position risk rate = current position maintenance margin / (current position holding margin + current position unrealized profit and loss) * 100%

Automatic Deleveraging

When users have forced liquidation, their remaining positions will be taken over by the liquidation system. If the forced liquidation position cannot be liquidated in the market, and when the mark price reaches the bankruptcy price, a liquidation will occur. At this time, the automatic deleveraging system will deleverage the investors who hold positions in the opposite direction. The sequence of deleveraging will be determined based on the leverage and profit ratio. (The higher the profit, the higher the leverage position will be forced to participate in the counterparty to deleverage)

ADL will only be triggered when the following two conditions are met:

When the market price has reached or lowered than the bankruptcy price, the system still has a user's forced liquidation position taken over (Open Position).
Insurance is insufficient to compensate for this loss.

Bankruptcy price definition

The margin held is used to fully cover the loss of the position.

ADL's ranking will be based on the rate of return, and the person with the highest profit rate and the highest leverage will be prioritized by ADL.

The process of deleveraging is as follows:

Liquidate the position according to the bankruptcy price of the user's forced liquidation position. At this time, when the risk margin is still insufficient, ADL is triggered.
The counterparty calculates the ranking of effective leverage through the rate of return and effective leverage. Traders with aggressive trading strategies and the most profit will be prioritized by the ADL sequence to participate in deleveraging.
The ADL executed party and the trader with the highest effective leverage profit and loss will process ADL at the bankruptcy price.

Note: This document will be continuously updated.
The final interpretation right belongs to Future.