1. What is Mark Price?
Mark Price is designed to provide a more reliable measure of a contract's fair value. Unlike the Last Price, which reflects the latest trades in the Futures market, Mark Price is calculated using multiple market data sources, including the Price Index, Futures market prices, and the Funding Rate. Because Mark Price and Last Price are calculated differently, they may differ at times. This helps reduce the impact of short-term price fluctuations and abnormal market activity when assessing position.
Toobit uses Mark Price to calculate unrealized P&L and determine whether a position should be liquidated. If the Mark Price reaches the Liquidation Price of a position, the position may be liquidated.
2. Why is Mark Price used?
2.1 Helps reduce the impact of abnormal market conditions
Mark Price is not based solely on the latest trade price of a Futures contract. Instead, it incorporates multiple market data points to reduce the impact of sudden price movements, abnormal trades, and market manipulation on position risk assessment. This provides a more stable reference for determining the risk of a position.
2.2 Reflects a broader range of market data
The Mark Price calculation incorporates data from both the Futures and Spot markets, including the Best Bid and Best Ask prices in the order book, the Funding Rate, and the Price Index. The Price Index is derived from spot prices of the underlying asset across major cryptocurrency exchanges, providing a broader market reference for the contract's fair value.
2.3 Price Index is a key component
The Price Index represents the composite spot price of the underlying asset across major Spot markets. It is an important component of the Mark Price calculation and helps reduce the impact of price movements on any single trading venue when assessing Futures position risk.
3. How is the Mark Price calculated for USDⓈ-M perpetual futures?
For perpetual futures, Toobit calculates three raw price values and uses their median as the final Mark Price. Mark Price is updated every second.
The three raw price values are:
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Price 1: Last price on the Toobit futures market
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Price 2: A price calculated using the Price Index and Funding Rate
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Price 3: A price calculated using the Price Index and the Futures order book basis
Final Mark Price = Median of Price 1, Price 2, and Price 3
Price 2 calculation
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Price 2 = Price Index × [1 + Last Funding Rate × (Time Until Next Funding ÷ Funding Period)]
Where:
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The funding period is the interval between funding payments, measured in hours.
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Time until next funding is the time remaining until the next funding payment, measured in hours.
For example, if the funding period is 8 hours and the previous funding payment was made 2 hours ago, the time until the next funding is 6 hours.
Note: Funding payments are exchanged between long and short position holders. Toobit acts only as a neutral intermediary and does not receive or pay the Funding Rate.
Price 3 calculation
Price 3 = Price Index + 5-Minute Moving Average of the Order Book Basis
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The 5-minute moving average of the order book basis is calculated by taking the average of the Best Bid and Best Ask prices, subtracting the Price Index, and then averaging the resulting values over the previous 5 minutes. The calculation is performed every 5 seconds, using 60 data points.
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5-Minute Moving Average = Σ[((Bid1_i + Ask1_i) ÷ 2) − PI_i] ÷ 60
Where:
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PI is the Price Index when each data point is recorded.
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Bid1_i, Ask1_i, and P1_i are recorded at 5-second intervals over the previous 5 minutes. A total of 60 data points are collected during each 5 minutes.
For more information, please refer to the Price Index for the relevant USDⓈ-M futures contract.
Special cases
1. During periods of extreme volatility, Mark Price may temporarily lag behind the market price. As a result, the unrealized PnL shown before a position is closed may differ from the realized PnL after execution. This mechanism helps reduce the risk of unnecessary liquidation caused by short-term price fluctuations or abnormal market activity.
2. During highly volatile market conditions, Toobit may adjust the Mark Price calculation methodology as needed to ensure that it continues to reflect prevailing market conditions.
FAQ
1. What is the difference between the Mark Price and the Last Price?
The Mark Price is used to calculate unrealized P&L and determine whether a position should be liquidated, while the Last Price reflects actual trades in the futures market. Since they are calculated differently, the two prices may differ.
2. How often is the Mark Price updated?
Mark Price for USDⓈ-M perpetual futures is updated every second to reflect changes in market conditions.
3. Does the Mark Price affect the actual execution price?
No. The Mark Price is primarily used for position risk assessment, unrealized PnL calculation, and liquidation. It does not represent the actual execution price. Your actual execution price is based on the price at which your order is matched in the market.
4. Why can the Mark Price sometimes lag behind the market price?
During extreme market conditions or sharp price fluctuations, the Mark Price may temporarily lag behind actual market movements. This is part of the Mark Price mechanism and helps reduce the risk of unnecessary liquidation caused by short-term price fluctuations or abnormal market conditions.
Disclaimer and Risk Warning
The trading tutorials, information, and examples provided by Toobit are for educational and informational purposes only and do not constitute financial, investment, or trading advice. Cryptocurrency trading involves significant risks and may result in loss of funds. The information and examples provided are for reference only and do not guarantee any returns. Please conduct your own research, fully understand the relevant products and associated risks, and make trading decisions based on your own risk tolerance. Toobit is not responsible for any trading decisions made based on this information or for any losses resulting from such decisions.
