Perpetual Pricing

Perpetual Contracts on FriendFutures

Welcome to the FriendFutures user guide on perpetual contracts. The purpose of this guide is to offer a comprehensive understanding of the pricing mechanism that underpins perpetual contracts on our platform.

1. Introduction to Perpetual Contracts

Perpetual contracts provide traders with the flexibility to assume either long or short positions without the requirement to take physical delivery of the underlying asset. A crucial element of these contracts is maintaining a close correlation between their price and the spot price of the asset. This alignment is achieved through a dual mechanism involving the spot market price and the funding rate.

2. Spot Price

The spot price represents the current market valuation of the asset, obtained directly from our reliable data feed. Essentially, it serves as the immediate settlement price for the asset within a real-time trading environment.

3. Funding Rate

The funding rate plays a pivotal role in maintaining the price of the perpetual contract closely tied to the spot price. This rate serves as a fee that is exchanged between traders holding long positions and those holding short positions.

- Premium Index

The Premium Index is the difference between the most recent trading price of the perpetual contract and the spot price. It provides a quick insight into how the current market deviates from the real-time spot price.

- Interest Rate

The Interest Rate is a predetermined value, often derived from the interest rate differential between the two assets involved in the trade. For example, in a BTC/USD contract, this rate may be set at a minimal fixed value or even zero.

The initial formula for calculating the funding rate takes into account both the Premium Index and the Interest Rate, ensuring a balanced representation in the calculation.

4. Perpetual Price Calculation

While the spot price is the primary driver of the perpetual contract price at any given time, the funding rate exerts an indirect influence. The funding rate incentivizes traders to adjust their positions, guiding the perpetual contract price toward alignment with the spot price. It's important to understand that the funding rate typically takes the form of a fee that is either paid or received by traders.

5. Important Considerations

When trading perpetual contracts on FriendFutures:

• 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 FriendFutures offer traders a distinctive avenue to interact with Friendtech shares/keys, all without the limitations of acquiring them in the spot market. By gaining a thorough comprehension of the underlying mechanisms, such as spot price and funding rate, traders can navigate the platform with confidence and make well-informed choices.

We trust that this guide has provided clarity on the complexities of perpetual contracts on our platform. Happy trading!