What is the difference between the mark price and the last price in futures trading?

Understanding Futures Trading Price Mechanics

In futures trading, two critical price indicators often confuse new traders: the mark price and the last price. While both are related to the valuation of a futures contract, they serve fundamentally different purposes and are calculated using distinct methodologies. Recognizing the difference is essential for managing risk, avoiding liquidations, and understanding position valuation in volatile markets.

The last price refers to the most recent transaction price at which a futures contract was bought or sold on the exchange. It reflects actual market activity and is a real-time snapshot of the latest trade executed. This price is what traders typically see quoted when checking the current market value of a contract. However, due to the nature of order books and low liquidity in certain contracts, the last price can be misleading, especially during rapid price swings or periods of low trading volume.

What Is the Mark Price and Why It Matters

The mark price is a calculated value used by exchanges to determine the fair value of a futures contract. Unlike the last price, it is not based solely on the most recent trade. Instead, it is derived using a combination of the underlying spot price, funding rates, and sometimes the average of bid and ask prices from related markets. The primary purpose of the mark price is to prevent manipulation and erroneous liquidations during periods of extreme volatility.

Exchanges use the mark price to calculate unrealized profit and loss (PnL) and to determine liquidation levels for open positions. Because it incorporates data from external sources such as spot markets and funding rates, it provides a more stable and accurate reflection of the contract’s true value. For example, if the last price spikes due to a large market order, the mark price will adjust more gradually, reflecting broader market conditions rather than a single trade.

How the Mark Price Is Calculated

The exact formula for the mark price varies by exchange, but common components include:

• The spot price of the underlying asset from reliable price oracles
• The funding rate mechanism, which accounts for the cost of carry
• A time-weighted average price (TWAP) of the bid-ask spread from the order book
• Data from perpetual swap funding intervals

For instance, on Binance Futures, the mark price is computed using the spot price of Bitcoin (or other assets) from multiple exchanges, adjusted by the average premium or discount observed in the perpetual futures market. This ensures that the mark price remains close to fair market value even if the last traded price deviates significantly due to thin order books or large market orders.

On Bybit or OKX, the mark price may also incorporate a fair price marking system that adjusts based on the funding rate differential between the futures and spot markets. This helps maintain alignment between the futures price and the underlying asset’s value, reducing the risk of unfair liquidations.

Differences in Liquidation Triggers

One of the most crucial distinctions between the mark price and the last price lies in how liquidations are triggered. Most exchanges use the mark price, not the last price, to determine when a leveraged position is liquidated.

For example, if a trader holds a long position with 10x leverage and the mark price drops to the liquidation threshold, the position will be closed—even if the last price has not reached that level. This is because the mark price is considered a more reliable indicator of market value. Relying on the last price could allow traders to manipulate the market by placing large sell orders to trigger liquidations, a practice known as 'price wick attacks.'

Using the mark price as the liquidation benchmark protects traders from such manipulation. However, it can also lead to confusion when the last price appears favorable, but the position is still liquidated due to the mark price crossing the threshold.

Impact on Unrealized PnL and Margin Calculations

The unrealized PnL of an open futures position is calculated using the mark price, not the last price. This means that even if no trade has occurred recently, the value of your position will fluctuate based on changes in the mark price. This is particularly important in perpetual futures contracts, where funding payments are also tied to the difference between the mark price and the index price.

Margin requirements are similarly influenced by the mark price. Maintenance margin, which is the minimum equity required to keep a position open, is assessed against the mark price. If the mark price moves against your position and your margin ratio falls below the maintenance level, a margin call or liquidation may occur.

Traders must monitor both prices but should prioritize the mark price when assessing risk exposure. Discrepancies between the last price and the mark price—known as basis deviation—can signal potential volatility or liquidity issues.

Practical Example: Monitoring Price Discrepancies

Consider a scenario on Deribit where the last price of a Bitcoin futures contract is $68,000 due to a large market sell order. However, the mark price remains at $68,500 because the underlying spot price and funding rates have not changed significantly.

In this case:

• A long position might show a temporary paper loss based on the last price
• However, the actual liquidation risk is determined by the mark price, which is still above the liquidation level
• The unrealized PnL displayed on the platform will reflect the $68,500 mark price, not the $68,000 last price

This discrepancy highlights why traders should not panic during sudden price wicks. The system is designed to use the more stable mark price for critical risk management functions.

Frequently Asked Questions

Why does my position get liquidated even when the last price hasn’t reached my liquidation price?Liquidations are based on the mark price, not the last price. If the mark price hits your liquidation threshold—due to spot market movements or funding rate adjustments—your position will be closed regardless of the last traded price.

Can the mark price be manipulated?It is extremely difficult to manipulate the mark price because it relies on external price feeds, funding rates, and multi-exchange spot data. Most exchanges use decentralized oracles and time-averaged data to minimize manipulation risks.

Where can I view the mark price on my trading platform?On most platforms like Binance, Bybit, or OKX, the mark price is displayed near the price chart, often labeled as “Mark Price” or represented by a different colored line (e.g., purple or green) on the price graph. Check the contract information section for exact details.

Does the mark price affect my entry or exit orders?No, your entry and exit orders are executed based on the last price or the order book’s bid/ask prices. The mark price only affects position valuation, liquidation checks, and unrealized PnL calculations.