Bybit contract calculation formula

Bybit Contract Calculation Formula

Bybit, a renowned cryptocurrency derivatives exchange, employs a robust calculation formula to determine the profit or loss on futures contracts. Understanding this formula empowers traders to accurately assess their risk and potential returns.

Contract Value:

• The contract value represents the notional value of the underlying asset being traded.
• It is calculated as: Contract Value = Contract Size x Mark Price

Mark Price:

• The Mark Price is the current market price of the underlying asset, used for contract settlement.
• It is constantly updated based on a weighted average of prices from multiple exchanges.

Unrealized PnL:

• Unrealized PnL reflects the profit or loss that would be realized if the contract were closed at the Mark Price.
• It is calculated as: Unrealized PnL = (Mark Price - Entry Price) x Contract Size

Realized PnL:

• Realized PnL represents the profit or loss that has been realized when closing a contract position.
• It is calculated as: Realized PnL = (Exit Price - Entry Price) x Contract Size

Funding Rate:

• The Funding Rate is a periodic fee or rebate paid by long or short positions to maintain market balance.
• It is calculated as a function of the interest rate difference between the asset and the funding rate of the contract.

Position Maintenance Margin:

• The Position Maintenance Margin is the minimum margin required to keep a position open.
• It is calculated as a percentage of the contract value and is subject to market volatility.

Liquidation Price:

• The Liquidation Price is the point at which a position is automatically closed due to insufficient margin.
• It is calculated as: Liquidation Price = Entry Price +/- (Margin Ratio x Mark Price)
• Margin Ratio:

The Margin Ratio is a risk management parameter set by Bybit, representing the maximum leverage allowed for a contract.

• The calculations outlined above form the core of Bybit's contract trading mechanism, enabling traders to engage in futures contracts with confidence while managing their risk effectively.