FAQ / Futures

FAQ BTC/USD Futures Trading

Last updated: April 17, 2019

Definitions

  • Cryptology Perpetual Futures Contract: Our Perpetual Futures Contract is a derivative contract bonded to the price of the BTC price index as the underlying.

  • Index price: the Index Price is the average market price of different exchanges. The exchanges used for the Index Price are independent in order to avoid price manipulation.

  • Funding Rate: The Funding Rate, determines funds that will be received or marked off every 8 hours at 04:00 UTC, 12:00 UTC and 20:00 UTC. So we have 3 funding intervals per day. You will only pay or receive the Funding amount if you hold a position at one of these times. If you close your position prior to the Funding Rate exchange then you will not pay nor receive the Funding Rate. When the Funding Rate is positive, longs pay shorts. When the Funding Rate is negative, shorts pay longs. Cryptology does not charge any fees on the Funding Rate amount nor the exchange of it between longs and shorts, the Funding Rate is exchanged directly peer-to-peer. The Funding, is necessary to maintain the contract price close to the Index Price and avoid price manipulation on the exchange.

  • Mark Price: the Mark Price displays the Unrealized PNL. It is used to calculate the liquidation of the position and avoid price manipulation.

    • Mark Price = Index Price * ( 1 + Funding Rate * (Time to Funding / Funding Interval))
  • Open interest: total number of contracts in the order book.

  • Total balance: overall valuation of clients assets.

  • Equity: is a sum of total balance and Unrealized PNL.

  • Available: available assets on balance that could be used for trading.

  • Initial Margin: the amount that is necessary to enter into a leveraged position.

  • Maintenance Margin: Maintenance Margin is 50% of the Initial Margin. When your Margin becomes less than the Maintenance Margin, the position will be closed using the liquidation procedure.

  • Unrealized PNL: PNL that is calculated as a difference of the average price of a deal and the Mark Price.

  • Realized PNL: Realized PNL is calculated using the average price of opening position and the average price of the closing position.

  • Est. Liq. Price:it is an approximate price for liquidating the position. If the Mark price touches the Liquidation Price, the position will be liquidated.

  • Liquidation price: is the price which will be used to close the position in the case of liquidation.

How is the Funding calculated?

  • Funding Rate = Interest Rate Differencial + Premium Index
  • Interest Rate Differencial
    • Let’s suppose that BTC landing rate is 0.03% and USD landing rate is 0.06%, and we have 3 funding intervals per day.
    • Interest Rate Differencial = (0.06% - 0.03%) / 3 = 0.01%
  • Premium Index
    • Depending on the situation on the market, we determine impact bid price(IBP) and impact ask price(IAP). Impact price is calculated as Volume Weighted Average Price (VWAP) on the market for volume ~10 BTC
    • Premium Index = (max(0, Impact Ask Price - Mark Price) - max(0, Mark Price - Impact Bid Price)) / Index Price
  • The Funding Amount is equal to the position value times the Funding Rate.
    • For example, the Mark Price is 4000 USD. You create a buy limit order (taker fee) at 3:00 UTC of 5000 contracts (contract size: 1 USD) that is ~1.25 BTC.
    • You will pay a commission of 0.0003125 BTC [(5000*1)/4000*0.01%]
    • The Funding Rate is 0.01%. At 4:00 UTC the Funding will be charged from your balance.
    • Funding: -0.000125 BTC [(5000*1)/4000*0.01%]
    • After the price of BTC changes to 5000 USD and you decide to close part of your position, you would create a market order selling 4000 contracts.
    • You will also pay a commission of 0.0006 BTC [(4000*1)/5000*0.075%]
    • The Funding Rate is changed to -0.02%. At 8:00 UTC the Funding will be added to your balance for the remaining position of 1000 contracts .
    • Funding: +(1000*1)/5000*0.02%=+0.00004 BTC

How is my PNL calculated?

  • Assume that you bought 500 contracts (contract size: 1 USD) at 3800 USD and then sold by market order 400 contracts at 4000 USD.
  • As your position was not completely closed part of your unrealized PNL was transformed to realized PLN and the remaining of the position will be maintained as unrealized PNL:
  • You also made a market order, therefore, you have to pay taker's fee = 400/4000 * 0.075% = 0.000075 BTC
    • Realized PNL = 400 * 1 * (1/3800 - 1/4000) = 0,005263157 BTC minus fee
    • Unrealized PNL = (500 - 400) * 1 * (1/3800 - 1/4000) = 0.0001315789 BTC

What are the applicable fees?

  • Cryptology has constant trading fees for perpetual futures.
    • Taker fees: 0.075%
    • Maker fees: 0.005%
  • FYI: Maintenance Margin includes commission for closing an open position and also include next funding to reduce the risk of wasting liquidation fund.

What is Cross-Margin?

  • When you open a position on Cross-Margin, the system will work to maintain your margin above liquidation level by taking funds from your available balance. If there are not enough funds on your account, the system checks if it is possible to cancel active orders that hold margin and cancel these. If both conditions take place, all the open positions are closed at Market Price.
  • Using Cross-Margin, Leverage is calculated as: Position size/Balance.
  • NOTE: Currently, Futures on the Android version only supports Cross-Margin. Isolated Margin will be available soon.

What is Isolated-Margin?

  • When you open a position on Isolated-Margin, the system will liquidate your position when it reaches liquidation level automatically. It will not take funds from your available balance, nor affect other open positions.
  • Using Isolated-Margin, you can fix the leverage you would like to use. The Margin will be calculated as: Position Size x Leverage.
  • NOTE: Currently, by default, the web version opens the position on Cross-Margin. If you wish to change this, you will need to drag the leverage forward towards x100, you will then see "Isolated" instead of "Cross".

What is the Insurance Fund?

  • Cryptology offers 100x leverage for Perpetual Futures Contract on Bitcoin, this is a highly volatile financial product. These two factors cause a high risk of default. To cover possible obligations of one trader to the others, we decided to create an Insurance Fund. The Insurance Fund is used according to the discretion and risk management policy of Cryptology. When opening a position, the trading system calculates two prices, the Liquidation Price and the Bankruptcy Price.
  • Depending on the size of the position, liquidity and market volatility, the actual average Liquidation Price could be even worse than the Bankruptcy Price. In these cases, losses concerned with the market condition will be covered from the Liquidation Fund. If there are not enough funds to cover losses of liquidation then the system automatically goes to Auto-Deleveraging Liquidation. In the opposite case, if the actual average Liquidation Price is better than the Bankruptcy Price, these funds will go to the Liquidation Fund.

What is Auto-DeLeveraging (ADL)?

  • Auto deleveraging is a procedure on the market when it is necessary to cover losses of some traders but there are not enough funds in the Liquidation Fund. In this case, the most profitable positions on the market will be automatically closed to cover losses.