Introduction to Perpetual Contracts

Introduction to Perpetual Contracts

Introduction to Perpetual Contracts A perpetual contract is a type of futures contract that does not require delivery and can be held indefinitely. Users can earn profits from the rise/fall of digital asset prices by buying long or selling short.

Key points:

Expiration date: Each delivery contract has a fixed expiration date, and the delivery price is the arithmetic average of the BTC (LTC, etc.) USD index in the recent hour as the delivery price to close out all open positions of the current week's contract. Perpetual contracts do not have an expiration date and never expire.

Funding fee: Due to the absence of an expiration date, perpetual contracts require a "funding fee mechanism" to anchor the contract price to the spot price.

Mark price: Perpetual contracts use the mark price to calculate the unrealized profit and loss of users, effectively reducing the unnecessary frequent liquidation during market fluctuations.

Settlement every 1 minute: By settling every minute, the unrealized profit and loss is converted into realized profit and loss, improving the flexibility of fund usage.

Tiered maintenance margin rate system: The maintenance margin rate is the minimum margin rate required by the user to maintain the current position. When the margin rate is lower than the maintenance margin rate + liquidation fee rate, a liquidation or forced partial position reduction will be triggered. For users with different position sizes, a tiered maintenance margin rate system is implemented, that is, the larger the position size, the higher the maintenance margin rate, and the lower the maximum leverage multiple available to the user.

Forced partial liquidation: For users with large positions, when the margin rate is lower than the maintenance margin rate + liquidation fee rate of the current tier but higher than the maintenance margin rate + liquidation fee rate of the lowest tier, not all positions will be liquidated directly. The system will calculate the number of position reduction required to reduce the position by two tiers and perform a partial position reduction. After successfully downgrading, if the margin rate meets the maintenance margin rate requirement of the new tier, the partial position reduction will stop; if it still does not meet the requirement, the partial position reduction process will continue. In the case of a per-position model, during the forced partial liquidation process, the position is frozen and cannot be operated; in the case of an all-in-one model, during the forced partial liquidation process, the perpetual contract account of the currency is frozen and cannot be operated.