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Perpetual Contracts Guide

Overview


A Perpetual Contract is a derivative product that combines the simplicity of equities trading with the leverage of futures trading.

There is no expiry, contract rolling or settlement like traditional futures, and margin lending is not required for shorting.

Instead, traders can buy or sell contracts similar to equities trading

The primary mechanism to ensure that the contract prices tracks the underlying reference index price is the funding rate.

Traders pay or receive a funding rate which increases with the spread between the index price and contract price

All contracts are settled in crypto (primarily BTC)

Contracts


Contracts trade like traditional equities, except that they only require initial margin to open a positions

Contract values are constantly marked by comparing their average cost basis to the last traded price

Position value = (Mark Price - Average Cost) * Size

Unrealized Pnl = Sum of all positions values

Portfolio Value = Sum Collateral Coin Values + Unrealized Pnl

Funding Rate


Every 8 hours funding rates are calculated. If the Premium/Discount <> 1 percent of Index price no funding rate is processed. Otherwise payments are processed.

(Premium/Discount) = Mark price - Index price

Funding Rate = ((Premium/Discount) + 5%) / 200

If a Premium exists, then longs pay shorts

If a Discount exists, then shorts pay longs

These cash flow payments are peer to peer between contract holders, and Levidge does not charge a fee on them.