Perpetual Contracts Concepts

Phemex imposes Risk Limits to help clients manage their risks. Basically, the larger a position is, the smaller the leverage allowed. Please find the risk limit of each symbol below: BTCUSD (BTC) 100 150 200 250 300 350 400 450 500 550 IM  1% 1.5% 2% 2.5% 3% 3.5% 4% 4.5% 5% 5.5% MM  0.5% 1% 1.5% 2% 2.5% 3% 3.5% 4% 4.5% 5%   ETHUSD (USD) 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,0000,00 4,500,000 5,000,000 IM  1% 1.5% 2% 4% 5% 5.5% 6.5% 7.5% 8.5% 10% MM  0.5% 0.75% 1% 2% 2.5% 2.75% 3.25% 3.75% 4.25% 5%  ...

Traditional futures contracts always have an exact expiration or settlement date. Although its price deviates from the underlying asset’s price (basis) during its lifetime, these will always converge at expiration. Perpetual contracts, on the other hand, never expire and never settle in the traditional sense. As such, their prices could end up becoming significantly different than the underlying assets that they derive their value from. To prevent this from happening, a Funding Rate mechanism attempts to tether a contract’s price to its asset’s price. To learn more about perpetual contract, read What is a perpetual contract? What is a Funding...

Compared to Perpetual Futures prices, the Mark Price better estimates a contract’s ‘true’ value because it is less volatile in the short term. Phemex uses the Mark Price to prevent unnecessary liquidations and discourage market manipulations by bad actors. How to calculate the Mark Price for perpetual futures contracts? Mark price = Median* (Price1, Price 2, Contract Price) **Price 1 = Price Index * (1 + Last Funding Rate * (Time until next Funding / Funding period) **Price 2 = Price Index + Moving Average (15-minute Basis) **Moving Average (15-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index) The Moving Average...

One of the components used to help calculate our Mark Price is the Phemex Index price. To view, check out What is the Mark Price and Dual Pricing mechanism? Phemex BTC indices are sourced from the last traded prices of multiple spot markets. These include: Binance, Bitstamp, Coinbase, Huobi, Kraken, and OKEx. Phemex also obtains its USDT/USD rate from Binance and so on, in order to adjust prices quoted in USDT. Every time Phemex computes an index, it begins by removing the highest and lowest last traded prices found amongst these 6 exchanges. The final index price is the average...

Linear Contracts Linear contracts are USD-margined, quoted in USD, and settled in USD. You can only trade linear contracts using your USD Contract Trading Account. Let’s walk through an example using our recently added BTCUSD Linear Contract. Although you would be trading based on the price movements of BTC, you do not need to hold any BTC in your account. Instead, to open positions, you will use USD as your margin. Any profits or losses you incur at the time of closing your position will be paid or subtracted in USD. Linear contracts are useful when you expect prices to...

The Funding Rate has two main components: the Interest Rate and the Premium/ Discount. Phemex calculates the Premium Index (P) and Interest Rate (I) every minute and then applies an 8-Hour Time-Weighted-Average-Price (TWAP) over the series of minute rates. The Funding Rate is then calculated with this 8-Hour Interest Rate Component and the 8-Hour Premium/Discount Component. A +/-0.05% dampener is also added. Funding Rate (F) = Premium Index (P) + clamp (Interest Rate (I) – Premium Index (P), 0.05%, -0.05%) Hence, if (I – P) is within +/-0.05% then F = P + (I – P) = I. In other...

Phemex uses an Insurance Fund to prevent positions from becoming Auto-Deleveraged. The Insurance Fund alleviates unfilled liquidation orders on the platform before they are taken over by the auto-deleveraging system. Due to how Phemex’s platform is structured, the exchange does not require payments from traders who have negative account balances when they are liquidated in a leveraged trade. Instead, the exchange uses its Insurance Fund to ensure the winning party of a trade receives all of their expected profits, even if the losing party does not have enough to cover the winning party’s gains. The Fund grows from liquidations that...

Any user trading contracts on Phemex must have a minimum amount of funds (Maintenance Margin) in their account to keep a position open. Even when the position has a positive PNL, the funds in the account may drop below the Maintenance Margin requirements due to Funding Fees. If such is the case, the system will automatically calculate the number of contracts to be closed (Take Profit) in order to meet the Maintenance Margin requirements. Because prices are constantly fluctuating, there may be a discrepancy between the first batch of contracts closed and the number still needed to meet margin requirements....