Alpha Perpetual Pricing

Perpetual Contracts on Perps.Tech

Welcome to the Perps.Tech user guide on perpetual contracts. This guide aims to provide a clear understanding of how the pricing mechanism works for perpetual contracts on our platform.

Table of Contents

  • Introduction to Perpetual Contracts
  • Spot Price
  • Funding Rate
    • Premium Index
    • Interest Rate
  • Perpetual Price Calculation
  • Important Considerations
  • Conclusion

1. Introduction to Perpetual Contracts

Perpetual contracts offer traders the flexibility to take long or short positions without the obligation of taking delivery of the asset. A pivotal aspect of these contracts is ensuring that their price stays closely aligned with the asset's spot price. This alignment is made possible through the dual mechanism of the spot market price and the funding rate.

2. Spot Price

The spot price refers to the current market valuation of the asset, sourced directly from our trusted feed. It's essentially the immediate settlement price for the asset in a real-time trading environment.

3. Funding Rate

The funding rate plays a crucial role in ensuring the perpetual contract's price remains tethered to the spot price. This rate is a fee that gets exchanged between the traders in long positions and those in short positions.

- Premium Index

The Premium Index is the gap between the perpetual contract's most recent trading price and the spot price. It offers a snapshot of the current market's departure from the real-time spot price.

- Interest Rate

The Interest Rate is a pre-defined figure, frequently based on the interest rate difference between the two assets in trade. For instance, in a BTC/USD contract, this might be set to a negligible fixed figure or even zero.
The preliminary formula for the funding rate encompasses both the Premium Index and the Interest Rate, ensuring a balanced representation.

4. Perpetual Price Calculation

While the spot price is the primary influencer of the perpetual price at any moment, the funding rate exerts an indirect influence. The funding rate motivates traders to modify their positions, steering the perpetual price closer to the spot price. It's essential to note that the funding rate usually manifests as a fee that's either paid or received by traders.

5. Important Considerations

When trading perpetual contracts on Perps.Tech:
  • Regular Updates: It's crucial to stay updated with the latest spot price and funding rate to make informed trading decisions.
  • Risk Management: As with any financial instrument, it's essential to employ sound risk management strategies. The interplay between the spot price and funding rate can lead to variations in expected outcomes.
  • User Support: Always refer to our platform's resources or reach out to our support team for any clarifications or assistance.

6. Conclusion

Perpetual contracts on Perps.Tech provide traders with a unique opportunity to engage with Friendtech shares/keys without the constraints of buying spot. By understanding the underlying mechanisms like spot price and funding rate, traders can navigate the platform confidently and make informed decisions.
We hope this guide sheds light on the intricacies of perpetual contracts on our platform. Happy trading!