BingX contract calculation formula

Understanding the BingX contract calculation formula empowers traders to navigate the complex world of contract trading, calculate contract value, profit and loss, funding rate payments, margin requirements, and liquidation parameters effectively.

Nov 25, 2024 at 08:10 am

BingX Contract Calculation Formula: A Comprehensive Guide

Understanding the calculation formula behind a contract trading platform is crucial for successful trading. BingX, a leading cryptocurrency exchange, offers a comprehensive set of contract types with distinct calculation methods. This guide delves deep into the BingX contract calculation formula, providing a step-by-step explanation of each component to empower traders with the knowledge they need to navigate the complex world of contract trading.

Step 1: Understanding Contract Basics

1. Contract: A contract is a financial instrument that represents an agreement to buy or sell an underlying asset at a predetermined price on a future date.
2. Mark Price: The mark price is a real-time index price derived from the weighted average of recent trades on multiple exchanges. It serves as the reference price for contract calculations.
3. Index Price: The index price is a reference price that reflects the underlying asset's spot market value. It is typically based on data from reputable data providers.
4. Funding Rate: The funding rate is a periodic payment made between long and short positions to ensure that the contract price remains closely aligned with the index price.
5. Leverage: Leverage is a mechanism that allows traders to amplify their potential profits and losses by borrowing funds from the exchange. It is expressed as a ratio, such as 10x or 20x.

Step 2: Calculating Contract Value

1. Contract Value = Contract Size Mark Price Leverage

• Contract Size: The contract size represents the number of underlying assets represented by each contract.
• Mark Price: The mark price is the reference price used for contract valuation.
• Leverage: The leverage applied to the position increases the potential profits or losses.

For example: A BTCUSDT contract with a contract size of 0.01 BTC, a mark price of $20,000, and a leverage of 10x would have a contract value of $20,000 0.01 10 = $20,000.

Step 3: Calculating Profit and Loss (PnL)

1. Unrealized PnL = (Mark Price - Entry Price) Contract Size Leverage

• Mark Price: The current mark price of the contract.
• Entry Price: The price at which the position was entered.
• Contract Size: The number of underlying assets represented by each contract.
• Leverage: The leverage applied to the position.

For example: If the mark price of the BTCUSDT contract rises to $20,500 and the entry price was $20,000, the unrealized PnL would be ($20,500 - $20,000) 0.01 10 = $500.

2. Realized PnL = (Exit Price - Entry Price) Contract Size Leverage

• Exit Price: The price at which the position was exited.
• Entry Price: The price at which the position was entered.
• Contract Size: The number of underlying assets represented by each contract.
• Leverage: The leverage applied to the position.

For example: If the BTCUSDT contract is closed at $21,000, the realized PnL would be ($21,000 - $20,000) * 0.01 * 10 = $1,000.

Step 4: Calculating Funding Rate Payment

1. Funding Rate Payment = Funding Rate Contract Size Funding Rate Interval

• Funding Rate: The periodic payment rate between long and short positions.
• Contract Size: The number of underlying assets represented by each contract.
• Funding Rate Interval: The time interval at which the funding rate is applied.

For example, if the funding rate is 0.01%, the contract size is 0.01 BTC, and the funding rate interval is 8 hours, the funding rate payment would be 0.01% 0.01 8 = 0.000008 BTC.

Step 5: Margin Management

1. Initial Margin = Contract Value * Initial Margin Ratio

• Contract Value: The value of the contract calculated using the formula in Step 2.
• Initial Margin Ratio: The percentage of the contract value required as collateral.

2. Maintenance Margin = Contract Value * Maintenance Margin Ratio

• Contract Value: The value of the contract calculated using the formula in Step 2.
• Maintenance Margin Ratio: The minimum percentage of the contract value that must be maintained as collateral to prevent liquidation.

Step 6: Liquidation

1. Liquidation Price = Mark Price * Liquidation Threshold

• Mark Price: The current mark price of the contract.
• Liquidation Threshold: The price level at which a position is automatically closed out to prevent further losses.

2. Liquidation Fee = Liquidation Price * Liquidation Fee Rate

• Liquidation Price: The price at which the position is liquidated.
• Liquidation Fee Rate: The fee charged by the exchange for liquidating a position.

By thoroughly understanding the BingX contract calculation formula, traders gain a powerful tool for evaluating profit potential, managing risk, and making informed trading decisions.