FAQ About Futures Contract

Why is USD used as quote currency instead of USDT?
In futures contract, only one currency - USD is used as quote currency for transactions and settlement so that there’s no need to maintain multiple types of currencies. Meanwhile, the use of USD can also avoid the value fluctuation due to rate change of USDT.

 

How to long or short the market?
For example, if you expect the market to rise, you should go long (buy) the contract; And you will make profits when the market really rises, otherwise you will lose money. Short (sell) and vice versa. Please note: Users can only hold ONE position under the same contract, and can NOT long or short the contract at the same time.

 

Why do futures contracts amplify profits and losses compared to the spot trading?
The biggest difference between the futures contract and the spot trading is in trading mechanism: Compared to the spot trading, futures contract has a two-way trading mechanism with leveraged margin, and the margin is to use a certain amount of funds “guarantee” and you can trade with multiplied value of the funds.

For examples: User A intends to buy a BTC at $10,000 of market value: CoinEx’s contract is worth $1 each, and 1 BTC can be calculated into 10,000 contracts. In the absence of leverage, the purchase of a $10,000 BTC requires $10,000; However, when a 10% margin model is used, User A only needs $1,000. From another perspective, the value of $1,000 has been multiplied by 10 times. Similarly, if a 1% margin is used, User A only needs $100 or in other words the value of $100 is multiplied by 100 times.

 

How to close a position after opening?
There are two ways to close a position: The first is to select “Liquidate” or “Market Liq.” in the position; The second is to submit an order in the opposite position, and the system will determine that the position is closed; if the amount of opposite position exceeds the amount of current position, the excess amount after closing the position will establish a new position in the opposite market.

 

What caused the difference between the unrealized PNL and actual PNL after liquidation?
To ensure that the platform price is not maliciously manipulated, CoinEx uses the Mark Price to calculate the unrealized PNL while the actual PNL is determined by the actual price of liquidation. In this case, when there is a difference between the platform transaction price and the Mark Price, the unrealized PNL of the user's position at this time will have a certain discrepancy with the actual PNL.

 

What is Mark Price? And what does it do?
CoinEx employs a unique system called Fair Price Marking, where instead of the Last Price, the Mark Price is set as the Fair Price to avoid unnecessary liquidations. Without this system, the Mark Price may deviate from the Index Price difference if the market is being manipulated, or illiquid, leading to unnecessary liquidations. Please note that Fair Price Marking only affects the Liquidation Price and Unrealized PNL, and does not affect Realized PNL.

 

Why is my position liquidated?
To keep your positions open, a percentage of the value of the position needs to be held, known as the Maintenance Margin. You can view the Minimum Maintenance Margin Requirements on the Risk Limits page.

If you cannot fulfill your maintenance requirement, your position will be liquidated. Fair Price Marking is utilized on CoinEx to avoid liquidations due to illiquid markets or manipulation. The liquidation only occurs when the Fair Price is under the Liquidation Price for long or over it for short.

Your positions will be taken over by the Liquidation Engine and liquidated in the market if a Forced Liquidation occurs.

 

What is the Insurance Fund? And what does it do?
The insurance fund will be used if the liquidation orders cannot be filled in the contract market upon forced liquidation. Insurance Fund is mainly from profits achieved by the price differences between the position price after liquidation and the position price after bankruptcy. You may view the detailed asset information on [Insurance Fund] page.

 

Why is my position Auto-deleveraged?
Your position will be Auto-deleveraged if the insurance fund is insufficient for forced liquidation orders. Auto-deleverage occurs to the holders with opposite positions. The order in which the Auto-deleverage occurs is determined by the leverage and PNL %. The more lights lit up on Auto-Deleveraging Indicator, the bigger the chances of Auto-Deleveraging after liquidation.

If you wish to avoid Auto-deleverage, you may reopen your positions after liquidation.
Auto-deleverage will liquidate your position according to forced liquidation position.

 

Why am I charged of Funding Fees?
The concept of Funding Fees is introduced on CoinEx to have the Market Price anchored by the Spot Price. When the Contract Price is over the Spot Price, the payment is from longs to shorts. When the Contract Price is under the Spot Price, however, the opposite applies.

In this way, the mechanism ensures that the contract price is as consistent with the spot price as possible. If it deviates, the funding rate can make it return to the spot price.

 

Funding Fees = Position Value * Funding Fee%.

The Funding Fee is updated once every 8 hours at 0:00, 08:00 and 16:00 (UTC). The calculation is determined by the interest difference between the quote coin and base coin and the price difference between the fill price and external spot price.