Linear Perpetual futures are a type of contact where the settlement currency is a stablecoin such as USDC or USDT, instead of BTC/ETH. Unlike with inverse contracts, the provided margin will be USDC or USDT as appropriate, unless cross collateral is used.
Margin calculation examples
As the linear futures have a different underlying and margin currency the margin needs to be calculated in the margin currency. This is done on the index price of the underlying currency.
|
Standard Margin IM & MM examples Linear perpetual |
BTC_USDC - calculations |
USDC - Margin required |
SOL_USDC - Calculations |
USDC - Margin required |
|---|---|---|---|---|
|
Example: BTC USDC price = $100.000 |
Margin currency = USDC |
Example: SOL USDC price = $200 |
Margin Currency USDC |
|
|
Initial margin requirement |
2% + (POS Size in BTC) * 0.005% |
4% + (POS Size in SOL) * 0.0005% |
||
|
Position size 0 |
2% + 0 = 2% |
0 BTC = 0 USDC |
4% + 0 = 4% |
0 SOL = 0 USDC |
|
Position size 25 |
2% + 25 * 0.005% = 2.125% (position 25 BTC = 2,500,000 USDC) |
25 * 2.125% = 0.53125 BTC 0.53125 * 100,000 = 53,125 USDC |
4% + 25 * 0.0005% = 4.0125% (position 25 SOL = 5,000 USDC) |
25 * 4.0125% = 1.003125 SOL 1.003125 * 200 = 200.625 USDC |
|
Position size 350 |
2% + 350 * 0.005% = 3.75% (position 350 BTC = 35,000,000 USDC) |
350 * 3.75% = 13.125 BTC 13.125 BTC * 100,000 = 1,312,500 USDC |
- |
- |
|
Position size 6000 |
- |
- |
4% + 6000 * 0.0005% = 7% (position 6000 SOL = 1,200,000 USDC) |
6000 * 7% = 420 SOL 420 SOL * 200 = 84,000 USDC |
|
Maintenance margin requirement |
1% + (POS Size in BTC) * 0.005% perp |
2% + (POS Size in ETH) * 0.0005% |
||
|
Position size 0 |
1% + 0 = 1% |
0 BTC |
2% + 0 = 2% |
0 SOL = 0 USDC |
|
Position size 25 |
1% + 25 * 0.005% = 1.125% (position 25 BTC = 2,500,000 USDC) |
25 * 1.125% = 0.28125 BTC 0.28125 BTC * 100,000 = 28,125 USDC |
2% + 25 * 0.0005% = 2.0125% (position 25 SOL = 5,000 USDC) |
25 * 2.0125% = 0.503125 SOL 0.503125 SOL * 200 = 100.625 USDC |
|
Position size 350 |
1% + 350 * 0.005% = 2.75% (position 350 BTC = 35,000,000 USDC) |
350 * 2.75% = 9.625 BTC 9.625 BTC * 100,000 = 962,000 USDC |
- |
- |
|
Position size 6000 |
- |
- |
2% + 6000 * 0.0005% = 5% (position 6000 SOL = 1,200,000 USDC) |
6000 * 5% = 300 SOL 300 SOL * 200 = 60,000 USDC |
When the funding rate is positive, long position holders pay funding to the short position holders; when the funding rate is negative, short position holders pay funding to the long position holders. The funding rate is expressed as an 8-hour interest rate, and is calculated at any given time as follows:
Premium Rate
Premium Rate = ((Mark Price - Deribit Index) / Deribit Index) * 100%
Funding Rate
Sequentially, the funding rate is derived from the premium rate by applying a damper.
-
If the premium rate is within -0.025% and 0.025% range, the actual funding rate will be reduced to 0.00%.
-
If the premium rate is lower than -0.025%, then the actual funding rate will be the premium rate + 0.025%.
-
If the premium rate is higher than 0.025%, then the actual funding rate will be the premium rate - 0.025%.
-
Additionally, the funding rate is capped at +/ - 5% for all linear USDC perpetuals.
Funding Rate = Maximum (0.025%, Premium Rate) + Minimum (-0.025%, Premium Rate)
Time Fraction
Time Fraction = Funding Rate Time Period / 8 hours
The actual funding payment is calculated by multiplying the funding rate by the position size and the time fraction.
Funding Payment = Funding Rate * Position Size * Time Fraction
|
Example 1 |
If the mark price is at USDC 10,007.50 and the Deribit index is at USDC 10,000, the funding rate and premium rate are calculated as follows: Premium Rate = ((10,007.50 - 10,000) / 10,000) * 100% = 0.075% Funding Rate = Maximum (0.025%, 0.075%) + Minimum (-0.025%, 0.075%) = 0.075% - 0.025% = 0.05% Let's assume a trader has a long position of USDC 10,000 for 1 minute, and during this minute the mark price remains at USDC 10,007.50 and the Deribit index remains at USDC 10,000, in this case, the funding calculation for this period is: 8 hours = 480 minutes: Funding Rate = 1/480 * 0.05% = 0.0001041667% Funding Payment = 0.0001041667% * 10,000 = 0.01041667 USDC The short position holders receive this amount and the long position holders pay it. |
|
Example 2 |
If a trader chose to hold the position of the previous example for 8 hours and the mark price and Deribit index remained at USDC 10,007.50 and USDC 10,000 for the entire period, then the funding rate would be 0.05%. The funding payment would be paid by the longs and received by the shorts. For 8 hours, it would have been 5.00 USDC. |
|
Example 3 |
If the mark price is USDC 10,007.50 for 1 minute and then changes to USDC 9,992.50 the minute after that, however, the Index remains at USDC 10,000, then the net funding in these 2 minutes for a 10,000 USDC long position is exactly 0 USDC. After the first minute, the trader would pay: 1/480 * 0.05% * Position Size = 0.0001041667% * 10,000 = 0.01041667 USDC, however, the minute after, the trader would receive exactly the same amount. |
|
Example 4 |
The mark price is USDC 10,002, and the Index remains at USDC 10,000. In this case, real-time funding is zero (0.00%) because the mark price is within the +/-0.025% range from the index price (within USDC 9,997.50 and USDC 10,002.50). This can be checked by using the premium rate and funding rate formulas: Premium Rate = ((10,002 - 10,000) / 10,000) * 100% = 0.02% Funding Rate = Maximum (0.025%, Premium Rate) + Minimum (-0.025%, Premium Rate) = 0.025% - 0.025% = 0.00% |
In reality, the spread of the Deribit Index and the mark price changes continuously, and all changes are taken into account. Therefore, the examples above are extreme simplifications of the actual calculations. The funding paid or received is continuously added to the realized PNL and is moved to or from the cash balance at the daily settlement, at 08:00 UTC.
Fees on Funding
Deribit does not charge any fees on funding. All the funding payments are transferred between the holders of the perpetual contracts. This makes the funding a zero-sum game, where longs receive all funding from shorts, or shorts receive all funding from longs.
It is essential to understand how the mark price is calculated. We start by determining the "Fair Price". The fair price is calculated as the average of the fair impact bid and the fair impact ask.
Fair Impact Bid Price is an average price at which 100,000 USDC worth of contracts can be bought.
Fair Impact Ask Price is an average price at which 100,000 USDC worth of contracts can be sold.
Fair Price can never be higher than 0.1 % of best ask or lower than best bid
-
Fair Price = (Fair Impact Bid + Fair Impact Ask) / 2
The mark price is derived using both the Deribit Index and the fair price, by adding to the Deribit Index the 30 second exponential moving average (EMA) of the Fair Price - Deribit Index.
-
Mark Price = Deribit Index + 30 second EMA (Fair Price - Deribit Index)
We implement a safety setting on our mark price to not deviate by more than a certain percentage of Index. This is to prevent manipulation or to curb the impact of panic trading. When a deviation from index is genuine, then we would increase the possible deviation.
Trading outside of this bandwidth is still allowed.
The 30 second EMA is recalculated every second, so in total, there are 30 time periods in which the measurement of the latest second has a weight of 2 / (30 + 1) = 0.0645 or (6.45%).
Two parameters act as a boundary to the allowed trading range:
Perpetual trades are limited by Deribit Index + 1 minute EMA (Fair Price - Index) +/- 1.5%, and a fixed bandwidth of the Deribit Index of +/- 7.5%.
If the market circumstances require so, bandwidth parameters can be adjusted at the sole discretion of Deribit.
Due to various reasons, there can be a situation when perpetual contracts are traded at prices caused by an abnormal non-orderly market, with a high chance that one side of the trade has been done unwillingly. If a mistrade occurs at a price more than 2.5% away from the mark price, Deribit may adjust the prices or reverse the trades.
Please refer to Section 12 of the Exchange Rulebook for additional information.