Perpetual futures: glossary

  • Room 08
  • 25 terms

The terms

  • 24/7 trading24/7 trading means a contract keeps trading through nights, weekends and holidays while the underlying exchange is shut. The price you see then is…
  • Auto-deleveraging (ADL)Auto-deleveraging is the last step when a liquidated position's loss exceeds its margin and the insurance pool: the venue closes part of the most…
  • Cross marginCross margin uses your whole balance as margin for every open position, so a winner props up a loser and liquidation is further away, until one bad…
  • Funding rateThe funding rate is the periodic payment between longs and shorts that keeps a perpetual near the real price: above it, longs pay shorts; below…
  • Funding rate arbitrageFunding rate arbitrage is holding a long on one venue and a short on another in the same asset, with no view on price, to collect the difference in…
  • Insurance fundAn insurance fund is the pool a venue uses to cover losses when a liquidated position's margin is not enough, so winners get paid in full. When it…
  • Isolated marginIsolated margin ties a fixed amount of margin to one position, so that position can only lose what you gave it and the rest of your balance is…
  • Last traded priceThe last traded price is the most recent trade on the venue's own book, the one the chart shows. You never trade at it: you buy the ask and sell the…
  • Liquidation priceThe liquidation price is where the venue closes your leveraged position, computed from entry, leverage and margin before you click. Your real stop…
  • Maker and taker feesA maker fee is charged when your order rests on the book and adds liquidity; a taker fee when it fills against a resting order. Both are a percent…
  • Margin tiersMargin tiers raise the maintenance margin as a position grows, so maximum leverage falls as size rises and the two stop being separate decisions.…
  • Mark priceThe mark price is the price a venue judges your position by, for unrealised profit and liquidation, built from the reference price and the order…
  • Max slippageMax slippage is the setting that caps how far from the quoted price a market order may fill; beyond it the order is cut. It trades certainty of fill…
  • Open interestOpen interest is the total size of all open positions in a contract, how much money is in the trade. Rising open interest with a rising price means…
  • Oracle priceThe oracle price is the outside price a perpetual is pulled toward, taken from where the asset really trades. When the US market is shut there is no…
  • Perpetual futuresPerpetual futures are contracts that track an asset's price with no expiry date. Expiry is what pulls a normal future to the real price, which the…
  • Perpetual premium (basis)The perpetual premium, or basis, is the gap between a perpetual's price and its reference. A positive premium means longs are crowded and will pay…
  • Price band (discovery bounds)A price band, or discovery bound, is the limit a venue puts on how far a perpetual can move from its last reference price while the real market is…
  • Real-world asset (RWA)A real-world asset is a physical or financial thing, gold, oil, a US share, whose price you can hold a claim on and trade all day from India. An…
  • Reduce-only orderA reduce-only order can only shrink or close an existing position, never open or flip one, so a closing order cannot accidentally open the other…
  • ROE (return on equity in trading)ROE in trading is your profit or loss as a percent of the margin you posted, not of the position. At 10x a 1% move is 10% ROE, which makes it a…
  • Round-trip trading costRound-trip cost is everything a trade costs from entry to exit: the spread twice, the fee twice, slippage, and funding for every hour held, all on…
  • TestnetA testnet is the practice copy of a real venue: real prices, fake money. Every mechanical lecture ends on it, because reading about a liquidation…
  • TP/SL (take profit and stop loss)TP/SL is a take profit and a stop loss attached to a position, closing it at a target or a limit you set at entry. Writing both before the click is…
  • Unrealised P&LUnrealised P&L is the profit or loss on an open position at the mark price; it becomes realised when you close. Where unrealised profit counts as…