OKX contract calculation formula

The intricacies of the OKX contract calculation formula, which meticulously incorporates contract price, market price, funding rate, and trading fees, ensure precise determination of profit or loss for contract trades.

Nov 16, 2024 at 07:10 pm

OKX Contract Calculation Formula

OKX, a leading cryptocurrency exchange, provides a robust suite of contract trading instruments, enabling traders to speculate on the price movements of various cryptocurrencies. To ensure transparency and accuracy in its contract calculations, OKX employs a well-defined formula that determines the profit or loss incurred on each trade. This article delves into the details of the OKX contract calculation formula, shedding light on its components and the methodology used to determine the final settlement value.

Understanding the OKX Contract Calculation Formula

The OKX contract calculation formula consists of several key elements, each of which plays a vital role in determining the profit or loss of a contract trade:

1. Contract Price: The contract price is the price of the underlying asset at the time of contract creation. This price serves as the reference point for calculating the profit or loss when the contract expires.
2. Mark Price: The mark price is a dynamic price that fluctuates based on the latest trading activity and market conditions. It represents the fair value of the underlying asset and is used to determine the settlement value of a contract when it expires.
3. Funding Rate: The funding rate is a periodic payment made between long and short contract holders to ensure that the contract price stays in line with the mark price. Long contract holders pay a funding rate to short contract holders if the contract price is trading above the mark price, and vice versa.
4. Trading Fees: OKX charges a trading fee on each contract trade, which is deducted from the profit or loss when the contract is settled. The trading fee is a percentage of the contract value and varies depending on the type of contract being traded.

Steps Involved in Calculating OKX Contract Profit or Loss

The calculation of profit or loss on an OKX contract involves several steps:

Step 1: Calculate the Contract Value

The contract value is determined by multiplying the contract size by the contract price. For instance, if you are trading a Bitcoin futures contract with a size of 100 BTC and a contract price of $20,000, the contract value would be $2,000,000.

Step 2: Determine the Settlement Value

The settlement value of a contract is calculated using the mark price at the time of contract expiry. For example, if your Bitcoin futures contract expires when the mark price is $21,000, the settlement value would be $2,100,000.

Step 3: Calculate the Profit or Loss

The profit or loss on a contract is calculated by subtracting the contract value from the settlement value and then factoring in the funding rate and trading fees. If the settlement value is higher than the contract value, you have made a profit; if it is lower, you have incurred a loss.

Step 4: Final Settlement

The final settlement of a contract involves receiving or paying the profit or loss calculated in the previous steps, adjusted for any margin maintenance or liquidation costs that may have been incurred during the contract period.

Example of OKX Contract Calculation

To illustrate the OKX contract calculation formula, consider the following example:

Suppose you buy a Bitcoin futures contract with a size of 100 BTC at a contract price of $20,000. Let's assume that the following conditions apply during the contract period:

• Mark price at time of purchase: $20,000
• Mark price at time of expiry: $21,000
• Funding rate: 0.01% per hour (positive for long contract holders)
• Trading fee: 0.05%
• Contract duration: 24 hours

Step 1: Contract Value = 100 BTC * $20,000 = $2,000,000

Step 2: Settlement Value = 100 BTC * $21,000 = $2,100,000

Step 3: Profit = Settlement Value - Contract Value + Funding Fees - Trading Fees

Funding Fees = 0.01% of $2,000,000 * 24 hours = $48
Trading Fees = 0.05% of $2,100,000 = $1,050

Profit = $2,100,000 - $2,000,000 + $48 - $1,050 = $98

Step 4: Final Settlement

You receive a profit of $98 on the contract upon expiry.