What is the mark price of MEXC contracts? Why is it different from the spot price?

The mark price on MEXC, calculated using the index price and funding rate, provides a stable reference for futures trading, preventing unnecessary liquidations.

May 03, 2025 at 03:42 am

The mark price of MEXC contracts is a crucial concept for traders engaging in futures trading on the MEXC platform. It serves as a fair and stable reference price for open positions, helping to prevent unnecessary liquidations due to market volatility. The mark price is calculated using a combination of the spot price and the funding rate, which aims to align the futures price with the spot price over time. This article will delve into the intricacies of the mark price, its calculation, and why it differs from the spot price.

Understanding the Mark Price

The mark price is a calculated price used by MEXC to determine the unrealized profit and loss (PnL) of a futures position. It is designed to provide a more stable and fair valuation of a position, especially during periods of high volatility. The mark price is not the same as the last traded price or the index price; instead, it is a composite price that takes into account both the spot price and the funding rate.

Calculation of the Mark Price

The mark price is calculated using the following formula:

[ \text{Mark Price} = \text{Index Price} \times (1 + \text{Funding Rate}) ]

• Index Price: This is a reference price derived from multiple spot exchanges to provide a more accurate representation of the asset's value.
• Funding Rate: This is a periodic payment made between long and short positions to ensure that the futures price converges with the spot price over time.

By incorporating the funding rate, the mark price helps to mitigate the risk of liquidations caused by temporary price spikes or drops in the futures market.

Why the Mark Price Differs from the Spot Price

The spot price is the current market price at which an asset can be bought or sold for immediate delivery. In contrast, the mark price is a calculated value used specifically for futures contracts. There are several reasons why the mark price may differ from the spot price:

• Volatility: Futures markets can be more volatile than spot markets, leading to discrepancies between the two prices.
• Funding Rate: The inclusion of the funding rate in the mark price calculation can cause it to deviate from the spot price, especially if the funding rate is high.
• Market Manipulation: In some cases, traders may attempt to manipulate the futures market, causing the mark price to diverge from the spot price.

Importance of the Mark Price in Futures Trading

The mark price plays a critical role in futures trading on MEXC. It is used to:

• Determine Unrealized PnL: The mark price is used to calculate the unrealized profit and loss of a futures position, providing traders with a more accurate view of their potential gains or losses.
• Prevent Unnecessary Liquidations: By using a more stable reference price, the mark price helps to prevent liquidations that might occur due to short-term market fluctuations.
• Ensure Fairness: The mark price helps to ensure that all traders are evaluated based on the same reference price, promoting fairness and transparency in the market.

How to View the Mark Price on MEXC

To view the mark price on MEXC, follow these steps:

• Log in to your MEXC account: Ensure you are logged into your MEXC account to access the trading platform.
• Navigate to the Futures Trading Section: Click on the "Futures" tab at the top of the page to enter the futures trading section.
• Select the Contract: Choose the specific futures contract you are interested in from the list of available contracts.
• View the Mark Price: The mark price will be displayed on the trading interface, typically alongside the last traded price and the index price.

Practical Example of Mark Price vs. Spot Price

To illustrate the difference between the mark price and the spot price, consider the following example:

• Spot Price of Bitcoin: $30,000
• Index Price of Bitcoin Futures: $30,050
• Funding Rate: 0.01% (0.0001)

Using the mark price formula:

[ \text{Mark Price} = \text{Index Price} \times (1 + \text{Funding Rate}) ]
[ \text{Mark Price} = 30,050 \times (1 + 0.0001) ]
[ \text{Mark Price} = 30,053 ]

In this example, the mark price of the Bitcoin futures contract is $30,053, which is different from the spot price of $30,000. This difference is due to the inclusion of the funding rate and the index price in the mark price calculation.

Impact of the Mark Price on Trading Strategies

Understanding the mark price is essential for developing effective trading strategies on MEXC. Traders should consider the following factors when incorporating the mark price into their strategies:

• Risk Management: The mark price can help traders manage their risk more effectively by providing a more stable reference price for their positions.
• Position Sizing: Traders can use the mark price to determine the appropriate size of their positions, taking into account the potential impact of the funding rate on their unrealized PnL.
• Market Analysis: By comparing the mark price to the spot price, traders can gain insights into market sentiment and potential price movements.

Frequently Asked Questions

Q: Can the mark price be manipulated by traders?

A: While the mark price is designed to be a fair and stable reference price, there is always a risk of market manipulation. MEXC employs various measures to prevent manipulation, such as using multiple spot exchanges to calculate the index price and monitoring trading activity for suspicious behavior.

Q: How often is the funding rate updated, and how does it affect the mark price?

A: The funding rate is typically updated every 8 hours on MEXC. When the funding rate changes, it directly impacts the mark price, causing it to adjust accordingly. Traders should be aware of the funding rate schedule and its potential impact on their positions.

Q: Is the mark price used for all types of futures contracts on MEXC?

A: Yes, the mark price is used for all futures contracts on MEXC, regardless of the underlying asset. It provides a consistent and fair method for valuing positions across different contracts.

Q: How can I use the mark price to improve my trading performance?

A: To improve your trading performance, you can use the mark price to monitor your unrealized PnL more accurately, adjust your position sizes based on the funding rate, and analyze market trends by comparing the mark price to the spot price. By incorporating the mark price into your trading strategy, you can make more informed decisions and manage your risk more effectively.