Bitcoin futures on Deribit are cash settled rather than settled by physical delivery of BTC. This means that at expiration, the buyer of BTC futures will not buy the actual BTC, nor will the seller sell BTC. There will only be a transfer of profits/losses between the two opposing sides of the trade. When the contract expires, the expiration price is calculated as the 30 minute time weighted average price (TWAP) of the BTC index.
ETH futures work in the same way, but use the ETH index.
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Standard Margin IM & MM examples Futures |
BTC - calculations |
BTC - Margin required |
ETH - Calculations |
ETH - Margin required |
|---|---|---|---|---|
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Initial margin requirement |
4% + (POS Size in BTC) * 0.005% |
4% + (POS Size in ETH) * 0.0004% |
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Position size 0 |
4% + 0 = 4% |
0 BTC |
4% + 0 = 4% |
0 ETH |
|
Position size 25 |
4% + 25 * 0.005% = 4.125% |
25 * 4.125% = 1.03125 BTC |
4% + 25 * 0.0004% = 4.01% |
25 * 4.01% = 1.0025 ETH |
|
Position size 350 |
4% + 350 * 0.005% = 5.75% |
350 * 5.75% = 20.125 BTC |
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- |
|
Position size 6000 |
- |
- |
4% + 6000 * 0.0004% = 6.4% |
6000 * 6.4% = 384 ETH |
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Maintenance margin requirement |
2% + (POS Size in BTC) * 0.005% |
2% + (POS Size in ETH) * 0.0004% |
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|
Position size 0 |
2% + 0 = 2% |
0 BTC |
2% + 0 = 2% |
0 ETH |
|
Position size 25 |
2% + 25 * 0.005% = 2.125% |
25 * 2.125% = 0.53125 BTC |
2% + 25 * 0.0004% = 2.01% |
25 * 2.01% = 0.5025 ETH |
|
Position size 350 |
2% + 350 * 0.005% = 3.75% |
350 * 3.75% = 13.125 BTC |
- |
- |
|
Position size 6000 |
- |
- |
2% + 6000 * 0.0004% = 4.4% |
6000 * 4.4% = 264 ETH |
To better understand how futures contracts work on Deribit, below is an example:
A trader buys 100 futures contracts (size of one futures contract is 10 USD), at 10,000 USD per BTC. The trader is now long (buys) 1,000 USD worth of BTC with a price of 10,000 USD (100 contracts x 10 USD = 1,000 USD).
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Let's assume that the trader wants to close this position and sell these contracts at the price of 12,000 USD. In this scenario, the trader agreed to buy 1,000 USD worth of bitcoins at 10,000 USD, and later sold 1,000 USD worth of BTC for 12,000 USD/BTC.
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The trader's profit is1,000/10,000 – 1,000/12,000 = 0.01666 BTCor 200 USD, with BTC priced at 12,000 USD.
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If both orders were taker orders, the total fee paid on this round would be 2 * 0.05% of 1,000 USD = 1 USD(debited in BTC, so0.50/10,000 BTC + 0.50/12,000 BTC = 0.00005 + 0.00004166 = 0.00009166 BTC)
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The margin required to purchase 1,000 USD worth of BTC contracts is 40 USD (4% of 1,000 USD) and thus equals40/10,000 BTC= 0.004 BTC. Margin requirements also increase as a percentage of the position size, with a rate of 0.5% per 100 BTC.
When calculating unrealized profits and losses of futures contracts, not always the last traded price of the future is used.
To calculate the mark price, first, we must calculate the EMA (exponential moving average) of the difference between the bounded (around best bid and best ask) mid price and the Deribit Index.
The mark price is calculated as:
Index Price + EMA of the difference between bounded mid price and index price
Mark prices are determined by a mark-to-market model. When liquidity is low, the mark price is determined by the term structure. We bound the mark price around the index to prevent large swings.
Asymmetric Bandwidths
The mark price is constrained to not deviate beyond a certain percentage from the Deribit Index to prevent extreme fluctuations that could lead to liquidations. Normally, futures trade at a premium above the index. To manage this, we set bounds around this premium. For instance, if a future typically trades 2% above the index and we aim to restrict its movement to within 5% above or below, the effective bounds would be +7% (allowing for an increase) and -3% (limiting the decrease) relative to the index. By default, mark prices are permitted a deviation of up to 10% from the index for both BTC and ETH. However, this setup results in symmetric bandwidths around the index, so if one seeks to maintain the same premium bounds, a -7% bound is applied for discounts, which permits significantly larger decreases than what might be desired for asymmetrical bounds. In scenarios demanding higher premiums or discounts—such as during volatile periods or times of pronounced contango or backwardation—the bandwidth can be adjusted accordingly.
Futures trades are limited by fixed trading bandwidth:
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Maximum Buy Price: The upper limit for buy orders is calculated as (1+fixed trading bandwidth) × MarkPrice. For example, with a fixed trading bandwidth of 3%, the maximum buy price would be set at 103% of the mark price.
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Minimum Sell Price: The lower limit for sell orders is determined as (1−fixed trading bandwidth) × MarkPrice. Using the same fixed trading bandwidth of 3%, the minimum sell price would be 97% of the mark price.
If market circumstances require so, bandwidth parameters could be adjusted at the sole discretion of Deribit.
Limit orders beyond the bandwidth will be rejected. Market orders will be adjusted to limit orders with the minimum or maximum price allowed at that moment.
Due to various reasons, there can be a situation when futures 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.