Perpetual Futures Contract Basics

• What is a Perpetual Contract?
• What is the Mark Price?
• What are the differences between Market Price, Index Price and Mark Price?

What is a Perpetual Contract?

A perpetual contract is a product similar to a traditional futures contract in how it trades, but does not have an expiry date, so you can hold a position for as long as you like, as long as you pay a funding fee. Perpetual contracts trade like spot markets, tracking the underlying asset index price closely.

The features of a perpetual contract are as follows:

• Expiry Date: A perpetual contract does not have an expiry date

• Market Price: the last buy/sell price

• Underlying Asset of each contract is: 1/1000th of the corresponding digital currency

• PnL Base: All PnL can be settled in USDT / USDC / BTC / ETH

• Leverage: Allows you to enter a futures position that is worth much more than you are required to pay upfront.

• Margin: Funds required to open and maintain a position. You can use digital assets as your margin.

• Liquidation: When the mark price reaches your liquidation price, the liquidation engine will take over your position

• Mark Price: Perpetual contracts use the mark price to determine your unrealized PnL and when to trigger liquidation

• Funding Fees: Periodic payments exchanged between the buyer and seller every 1 hour

What is a Mark Price?

Your position’s mark price is weighted based on the index price; its main purposes are:

• To calculate the unrealized PnL

• To determine if liquidation, partial liquidation, or forced market buy/sell occurs

• To avoid market manipulation and unnecessary liquidation

What are the differences between Market Price, Index Price, and Mark Price?

• Market Price: The last price at which the asset was traded

• Index Price: The weighted average of the asset price based on Bitfinex/Bitstamp/Bittrex/Coinbase Pro/Kraken

• Mark Price: The price is used to calculate the unrealized PnL and the liquidation price of the perpetual contract