Perpetual contract is a financial derivative product launched by BKEX. In order to help you deepen your understanding, we will introduce the characteristics of perpetual contract, the main difference between perpetual contract and spot trading and traditional contract trading through this article.
【What is perpetual contract】
A perpetual contract is a financial derivative. It has the following two characteristics:
1. There is no expiry delivery date for perpetual contracts.
2. Through the funds rate mechanism, the perpetual contract makes the trading price of the perpetual contract close to the corresponding spot price.
【Types of perpetual contracts】
The BKEX digital currency trading platform provides forward perpetual contract trading with a maximum leverage of 100 times, and more perpetual contract trading targets and derivatives hedging tools will be launched one after another. Currently, the platform only accepts USDT as margin for all contract tradings, and all products are priced in USDT.
【The difference between spot trading and contract trading】
1. Unlike the spot market, the two counterparties to the trading do not settle immediately, but on a clearly agreed future date.
Important note: Due to the difference in the way the contract market calculates unrealized profit and loss, traders do not directly buy or sell physical commodities in the contract market, but trade contracts that represent commodities and settle in the future.
2. There is a further difference between the perpetual contract market and the spot market, that is, the perpetual contract has no expiry delivery date.
Important: Due to the cost of holding positions, the contract price is different from the spot market price. Like many contract markets, the platform uses a "funding rate" to ensure that the contract market price tends to the "mark price". Although this system will promote long-term price convergence between the underlying spot and contract prices, there may still be relatively large price differences between contract and spot prices in the short term.
【Difference between perpetual contract and delivery contract trading】
1. Perpetual futures are is similar to futures, with the main difference: perpetual contracts have no expiry date or settlement date.
2. In addition, perpetual contracts inherit the characteristics of delivery contracts, especially without the need to deliver the actual commodity, and imitate the behavior of the spot market to reduce the gap between the contract price and the marked price. This is a big improvement over traditional contracts (which have a long-term/fixed price difference to the spot price).
【Features of BKEX Perpetual Swap】
1. Double price mechanism: increase the difficulty of price manipulation
Market manipulation is the malicious manipulation of trading prices for personal gain. Such abnormal price fluctuations can lead to malicious liquidation of positions, thus creating a very unfair trading environment. In order to reduce the possibility of malicious manipulation of the market, BKEX uses a double price mechanism to ensure a fair trading environment. Currently, most exchanges use the latest market price as a trigger point for liquidation. However, BKEX uses a reasonable mark price as the trigger point for forced liquidation, rather than the latest market price on the platform. The mark price is calculated in real time with reference to the spot prices of the three major spot exchanges. So, even BKEX has no ability to influence the mark price.
2. Always anchor the spot market price
Another feature of BKEX perpetual contracts is that the trading price is always anchored to the spot market price without huge deviation. Funding costs are an important tool used to ensure this goal. BKEX calculates the funding fee by weighing the long and short trends of perpetual contract transactions on the exchange every 8 hours and other comprehensive factors, and one of the long and short parties pays the other, so as to ensure that the transaction price of the perpetual contract is always anchored to the spot price . Funding fees are generated every 8 hours and are charged at 8:00 am, 16:00 pm, and 24:00 pm every day.
3. Flexible leverage up to 100x
The spot leveraged trading market generally provides 3-5 times leverage, and the borrowing cost is also high. In the futures market, several major trading platforms only provide leverage of 5-20 times. However, BKEX perpetual contracts provide up to 100 times leverage, and traders can flexibly adjust after opening positions according to their trading needs. The platform provides a flexible gradient margin system while ensuring the best trading experience for traders.
4. The automatic reduction mechanism ensures the interests of traders
BKEX adopts a complete position crossing mechanism to ensure the interests of traders. This mechanism is used to determine who is responsible for the loss caused by the inability of the position to be traded at a price better than the bankruptcy price when the position is forced to close. Different from the socialized loss sharing mechanism, the losses are shared by all profitable traders. BKEX adopts an automatic reduction mechanism to ensure that the interests of traders are not affected by huge losses caused by a few high-risk speculators. The automatic liquidation system sorts according to the profit percentage and effective leverage of the client's position. That is, traders with high returns and high leverage will be selected first.
【Market Mechanism of Perpetual Contract】
Leverage multiple: BKEX provides different leverage levels for different products, and the maximum leverage can reach 100 times. Leverage is determined by the initial margin and maintenance margin levels. They determine the minimum capital a trader needs to open and maintain a position. Leverage is not a fixed multiple, but a minimum margin requirement. You can check the minimum amount of initial margin and maintenance margin on the risk limit document page.
Opening value: average opening price * opening volume
Position value: open position * mark price
Unrealized profit and loss: The trader's current contract position generates profit and loss, also known as floating profit and loss.
Realized profit and loss: It is the accumulated profit and loss generated by the trader's closed position before the settlement of the contract.
Profit: The realized profit that has been settled since the opening of the position + the unrealized profit since the last settlement.
Profit rate: = income / margin required when opening a position = income / (number of open positions * average opening price / leverage).