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About Perpetual Contract
Gate.io
Updated at:680 days 4 hours ago

1.Perpetual Contract

Perpetual contract is an innovative derivative. Unlike a traditional future,

it has no expiration date.It uses a peer-to-peer funding exchange mechanism and fair price marking method to make its price close to underlying reference Index Price.

Your maximum loss is the whole maintenance margin once your position is liquidated. The fee involves are funding payment and entry/exit commissions.



Traditional Future

Perpetual Contract

Expiration &Settlement

Yes

No

compared to spot price

Deviate from spot price

Close to spot price

How to tether to underlying index

Marking to market and settlement

Peer to peer funding exchange


2. Perpetual contracts on gate.io


Symbol


Realized PNL Calculation

BTC/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(1/Entry price-1/Exit price)

EOS/BTC

Quoted in BTC;PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

XRP/BTC

Quoted in BTC;PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

ETH/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

EOS/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

XRP/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

BCH/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

BSV/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)

LTC/USD

Quoted in USD; PNL and Margin denominated in BTC

Contracts * Multiplier X(Exit price-Entry price)


3. Mechanics of a Perpetual Contract Market


1) Fair Price Marking: Perpetual contracts are marked according to Fair Price, instead of the Last price. The Mark Price is used in Unrealized PNL and Liquidation Price calculation.

2) Initial and Maintenance Margin: Initial margin level determine how much leverage one can trade with and Maintenance Margin level determines at what point liquidation occurs.

3) Funding: long and short position holders exchange payment every 8 hours.


Funding:

Funding is exchanged between buyers and sellers at

0:00, 8:00, 16:00 UTC;

You will only pay or receive funding if you hold a position at one of these times.


Funding = Position Value * Funding Rate

Your position value is irrespective of leverage. When the Funding Rate is positive, longs pay shorts. When it is negative, shorts pay.


The funding rate of previous period applies to give user more insights in predicting the cost. Example: the result calculated from 0:00-8:00 will be used when funding payment takes place at 16:00.


Calculation of Funding Rate.

Funding rate consists of two parts, the interest rate spread of quote currency and settlement currency (we take it as 0.01%), and the premium or discount of exchange price and external spot prices.


Formula:

Funding rate = premium index +clamp (0.01% - premium index, 0.05%, -0.05%)

in which interest rate spread is 0.01%


Premium index =( Max (0 , depth weighted bid – mark price) - Max (0 , mark price – depth weighted ask) / index price



Funding rate is calculated every minute during the 8 hours’ period, we take the calculated average as the funding rate, formula


Clamp(average of 8 hours, fmax, -fmax)


in which fmax is(initial margin percentage -maintenance margin percentage) * 75%



Fair Price

Fair Price Marking is used to avoid unnecessary liquidations due to market manipulation or lack of liquidation.

The Fair Price equal to the underlying Index Price plus a decaying Funding basis rate.

Funding Basis = Funding Rate * (Time Until Funding / Funding Interval)


4. PNL Calculation

unrealised PNL is based on the difference between the average entry price and the mark price.

Realised PNL is based on the difference between the average entry price and exit price

Funding exchange payment and trading fees are accounted for through realized PNL.

5. Liquidation

To keep your position, you are required to hold a designated percentage of the position value on your contract account, known as the Maintenance Margin. If you cannot fulfill maintenance requirement, you will be liquidated and your maintenance margin will be lost.

Liquidation process

Step 1 cancels any open orders in the contract--if any

Step 2 If this does not satisfy the maintenance margin requirement then the position will be liquidated at the bankruptcy price.


6. Auto Deleveraging--ADL

In the event of liquidation, If the liquidation order cannot be filled on the market when mark price reaches the bankruptcy price, the opposing traders’ positions will be automatically deleveraged according to the priority rank, at the price of the bankruptcy price of the initial liquidated order.

ADL Priority Deleveraging Ranking

Priority rank is determined by average entry price. The more favourable entry price traders are more likely to be automatically deleveraged in the event of ADL.

Your priority position in the queue is shown to you by an indicator, representing your priority in the queue in 20% increments.

7 Risk Limit

The large size of position, if they can not be fully liquidated, may pose risks to others on the exchange. Gate.io uses a Step model to requires higher maintenance and initial margin level for large position size to minimize the risk.

Contract symbol

Base Risk Limit

Step

Base Initial margin

Base Maintenance

Max Risk Limit

BTC/USD

100 BTC

100 BTC

1%

0.5%

800 BTC

ETH/USD

50 BTC

50 BTC

2%

1%

500 BTC

EOS/USD

50 BTC

50 BTC

5%

2.5%

500 BTC

XRP/USD

50 BTC

50 BTC

5%

2.5%

500 BTC

BCH/USD

50 BTC

50 BTC

5%

2.5%

500 BTC

BSV/USD

50 BTC

50 BTC

5%

2.5%

500 BTC

LTC/USD

50 BTC

50 BTC

5%

2.5%

500 BTC


8.Insurance Fund

Gate.io uses insurance funds to avoid occurrence of traders’ position being taken over by auto-deleveraging . The insurance funds will be used to aggress unfilled liquidation orders before it is taken over by auto-deleveraging engine. The insurance funds grows from liquidation orders filled at better prices than their bankruptcy price.

9. Stop Order --Stop Loss and Take profit Order

Stop Loss and Take profit Order is an auto-trading strategy that will send a preset order to the market when market reaches a certain Trigger Price.

The engine will check the validity of the preset order only when the stop order is triggered. If it passes the validity check, the preset order will be send to the market. If fails, the order will not be send to the market and the stop order expires.

Common reasons of failure in validity check are lack of balance or conflicting with existing orders.

Example:

1. For Stop Order with Close on Trigger box checked, if there is already a close order on the market for a certain open position, this close on trigger order order will not be placed after triggered.

If there is an existing close order already, close on trigger or reduce only order will not be able to place

2. If the stop order is triggered, there is insufficient balance to place the pre-set order, the order will not be placed.


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