Choosing Last, Mark, or Index Price Triggers for Derivatives Stops

Summary

This guide compares last-traded, mark, and index prices as triggers for stops on a crypto derivatives exchange. A last-price trigger responds directly to trades in that venue, so it reacts quickly but may activate on a brief wick or unusually deep execution. A mark-price trigger uses a smoothed measure tied to the index and fair price; it is used in profit-and-loss calculations and liquidation checks, but can lag traded prices during fast moves.

The index averages prices across exchanges. It can help confirm a breakout for entries, though the order book may move before the index reaches the trigger and a nearby limit order may not fill. For exits, the article cautions that futures premiums or discounts can make index triggers late relative to market prices. It also describes combining reduce-only stops with different triggers or quantities. Trigger choice entails tradeoffs in speed, noise, and fill price; no trigger guarantees a favorable execution price.

Key ideas

• Last-price triggers react to local trades but can be activated by brief price wicks.
• Mark-price triggers are smoothed and useful for monitoring liquidation risk, but may lag during rapid moves.
• Index-price triggers reflect an average across venues and can confirm moves for entries.
• Futures premiums or discounts can make index-triggered exits late relative to traded prices.
• Reduce-only orders can combine multiple triggers or staged exit quantities without reopening a position.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.