1. Perceptual Contract
A perpetual contract is a derivative similar to a leveraged spot transaction, which is settled in currencies such as BTC and USDT. Investors buy the contract to be a long position holder and yield a profit if the digital currency’s price goes up. On the contrary, they sell the contract to place short orders to benefit when the price dumps.
There are certain differences from traditional futures: It has no expiry date and therefore it has no restrictions on the time of the position. In order to ensure that the underlying price index is tracked, the perpetual contract guarantees that its price closely follows the price of the underlying asset through a Funding Fee mechanism.
2. Market Mechanism for Perceptual Contract
When trading a perpetual contract, traders have to understand several mechanisms of the perpetual market. The key parts to note are:
Position Marking: The perpetual contract uses a reasonable price mark method. The mark price determines the unrealized profit and loss and the closing position price.
Initial Margin and Maintenance Margin: The margins decide what leverage rate you can use to open a position and at which price will the closing position be triggered.
Funding Fees: The fee is paid regularly between the buyer and the seller every 8 hours. If the rate is positive, longs will have to pay and the shorts get the funding fees. Vice versa.Please note that you only need to pay or collect funds if you hold a position at the time stamp of the funds.
Time Stamp of Funding Fees: 08:00 (UTC+8), 16:00 (UTC+), 24:00 (UTC+8)
Users are able to check the current funding fees of the contract by clicking the “Contract Details” at the bottom left of the trading option. They can also find them in their personal “Contract Details”. Please check the historical funding fees in “Funding Fees History”.
3. Potential Users
USDT is adopted as the underlying assets as well as the settlement currency
of Hoo Conceptual Contract. The potential users would be:
(1) Users who tends to calculate their profit and loss in fiat
(2) Traders who look for the definite profit of underlying fiat
(3) Those who hold USDT or other stable coins
Dec. 19, 2019