Perpetual contracts are futures contracts without expiry, unlike traditional futures contracts, which expire after a predetermined time (monthly, quarterly, yearly, etc.).
For perpetual contracts, a mechanism called funding is employed to keep the price tethered to the underlying spot price, which will be the Bitfex Index Price.
After a fixed interval of 8 hours, there is an exchange of payments based on the value and sign of the funding rate. The funding rate is calculated over this fixed interval over the course of 24 hours, every 8 hours. Thus, funding happens at 0 UTC, 8 UTC and 16 UTC in a 24 hours cycle. Only traders holding a position at these times will either pay or receive funding.
The funding to be paid/received is given by:
Funding = Position Value * Funding Rate.
For a positive rate, longs (buyers) pay the shorts (sellers). If the rate is negative, the shorts pay the longs.
Funding is a net-zero operation for the exchange; it is payments being exchanged between buyers and sellers.
Let Funding Rate be +0.01% at 8:00 UTC. Suppose a trader entered a position 10,000 long BTCUSD at 5:00 UTC, when BTCUSD was trading at $9800. At 8:00 UTC, suppose it is at $10,000 then Position Value will be 10,000 / 10,000 = 1 BTC Thus, Funding = 1 * 0.01% = 0.001 BTC Therefore, if the trader closes position at a price of say 10,200 at 14 UTC, before next funding happens, then, Realised Profit = (1/9,800 - 1/10,200) * 10,000 = 0.04001601 BTC Net Profit = Realised Profit - Funding Paid = 0.04001601 - 0.001 = 0.03901601 BTC
|Underlying Index||Bitfex BTC Index|
|Contract Size||1 USD|
|Instrument Type||Inverse Futures|
|Price Quotation||US Dollars per 1 bitcoin|
|Tick Size||0.5 USD|
|P&L Settlement||Cash Settled in BTC|
|Position Limit||500,000 contracts. To increase limit contact us at email@example.com|
|Fees||See Fee Structure for complete breakdown as per profile|
Mark Price and Funding Rate Calculation
For Perpetual Contracts, the Mark Price is used for unrealised PnL calculation and liquidation purposes.
The Mark Price for a Perpetual Contract is given by:
Funding Basis = Funding Rate * (Time Until Funding / Funding Interval) Mark Price = Index Price * (1 + Funding Basis)