Linear Futures on Deribit are cash settled in USDC. At expiration, there will only be a transfer of the profits/losses (in USDC) 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 relevant index.
To better understand how futures contracts work on Deribit, below is an example:
A trader buys PAXG futures contracts with a size of 10 PAXG, at 3,000 USDC per PAXG.
-
Let's assume that the price of the PAXG future has now increased to 4,000 USDC, and the trader wants to close this position. In this scenario, the trader agreed to buy 10 PAXG at a price of 3,000 USDC per PAXG, and later to sell 10 PAXG for 4,000 USDC per PAXG.
-
The trader's profit isor 1,000 USDC per PAXG (4,000 - 3,000), and so the total profit is 10,000 USDC (because the position size was 10 PAXG), minus any fees paid.
When calculating unrealized profits and losses of open futures positions, it is the mark price of the instrument that is used, rather than the last traded price.
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. In scenarios demanding higher premiums or discounts—such as during volatile periods or times of pronounced contango or backwardation—the bandwidth can be adjusted by the Deribit risk team accordingly.
Futures trades are limited by fixed trading bandwidth:
-
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.
-
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 (in the wrong direction) 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.