BTC Inverse Contracts: Converting USD Profit and Loss to BTC
Summary
The document explains how profit and loss on Deribit inverse futures and perpetuals is calculated in USD but settled in BTC. Because the account uses BTC as collateral, the BTC amount corresponding to a given USD profit depends on the BTCUSD price when the position is closed. The examples compare a long position opened at $8,000 and closed at higher prices, showing that BTC gains rise nonlinearly even when dollar gains scale with the price move.
It distinguishes base currency (BTC) from quote currency (USD), and notes that the position’s BTC equivalent changes as the market moves while formulas use the BTC size at entry. It also describes risk implications: equal dollar moves up and down do not produce equal BTC outcomes, affecting liquidation distances and potential losses for futures and options positions. The article refers readers to formulas and spreadsheets, but those formulas are missing from the supplied text, so it does not provide a complete calculation guide here.
Key ideas
- Inverse contracts calculate P&L in USD but pay it in BTC.
- The BTC value of a dollar profit depends on the BTCUSD price at settlement.
- A position’s BTC equivalent varies over time even when its USD size is fixed.
- Equal upward and downward dollar moves can produce asymmetric BTC gains and losses.
- Collateral currency affects liquidation distance and the risk of derivative positions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.