How Index and Mark Prices Work in Margined Crypto Futures

Summary

The document explains how index and mark prices are used in margined crypto futures. An index price combines spot prices from multiple liquid exchanges, with weighting and fallback rules intended to handle outliers or missing venue data. The mark price uses that index plus a moving average of the futures basis, where basis is derived from the contract midpoint and the spot index. The article also gives separate unrealized profit and loss formulas for crypto-margined and USDT-margined contracts.

Mark prices are used to calculate unrealized profit and loss and to trigger liquidations, while a multi-exchange index can reduce dependence on a single venue's price. The basis averaging is intended to damp short-term contract-price fluctuations and reduce liquidations caused by abnormal volatility. The methodology and examples are specific to the exchange described; index constituents, update rules, and protections can differ across platforms. The text also contains an inconsistency in its FAQ, which loosely describes the mark price as a weighted spot average rather than distinguishing it from the index-plus-basis calculation.

Key ideas

• The index price aggregates spot prices from multiple exchanges and may apply safeguards for outliers or missing data.
• The mark price combines the spot index with a moving average of the futures basis.
• Mark prices are used for unrealized profit and loss calculations and liquidation triggers.
• Basis averaging is intended to reduce the effect of short-term contract price swings.
• Exchange-specific index rules may differ, and the article's FAQ describes the mark price inconsistently.

Tags

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