Why should I trade Futures?
Trading Futures can be advantageous in a number of ways compared to trading the underlying asset directly: Futures allow benefiting from price increases as well as declines, provide financial leverage, can be used to hedge price risk and are associated with low transaction fees.
What instruments do you list?
We currently list:
- Futures on the US Dollar price of bitcoin
- Futures on the US Dollar price of Ether
- Futures on the US Dollar price of Litecoin
- Futures on the US Dollar price of Ripple XRP
- Futures on the US Dollar price of Bitcoin Cash
- Futures on the bitcoin price of Ripple XRP.
Futures come in two main types:
- Perpetual contracts which have no expiry/settlement and instead auto-roll every 4-hours with a funding rate mechanism paid between Long and Short positions to anchor the price to the spot rate
- Fixed Maturity contracts with a Monthly and/or Quarterly maturity schedule. These carry an alias/tag for easier reference: Month and Quarter.
The Month contract has an expiry that is the last Friday of the coming month. For example, in beginning of February, the Month reflects expiry at 4 PM London on the last Friday of February. In the day after, on Saturday after the last Friday of April, the Month contract is the one expirying at 4 PM London time on the last Friday in May.
The Quarter contract reflects the upcoming last Friday of the Month in the quarterly cycle schedule which is NOT already existing as a Month contract: March, June, September, and December. For example, if the date is April 10th, the Quarter contract will be expiring on the last friday of June at 4 PM London.
Quarter contracts become Month contracts after the expiration/settlement of a Month contract which precedes the Quarterly cycle referred above. For example, if it is February 1 there is a Month contract expiring the last Friday of February, and a Quarter contract expiring on last Friday of March. When that February Month contract expires, the March Quarter contract becomes a "Month" contract, and a new June contract is launched which expires on the last Friday which is tagged "Quarter".
|Bitcoin-Dollar Futures||Ether-Dollar Futures||Litecoin-Dollar Futures||Ripple-Dollar Futures||BitcoinCash-Dollar Futures||Ripple-Bitcoin Futures|
|Contract Size||1 US Dollar||1 US Dollar||1 US Dollar||1 US Dollar||1 US Dollar||1 Ripple XRP|
|Maturities||Perpetual, Monthly, Quarterly||Perpetual, Monthly, Quarterly||Perpetual, Monthly, Quarterly||Perpetual, Monthly, Quarterly||Perpetual, Monthly, Quarterly||Perpetual and Monthly or Quarterly|
Instruments are described in more detail here.
What does inverse mean?
Inverse futures just mean that the payoff structure for your position is non-linear. The P&L is calculated so that the profit on the collateral you use matches the denomination of the contract as price adjusts.
For example, in Bitcoin-Dollar, because you are using Bitcoin as collateral and the contract is denominated in USD, as the price falls, the payout in bitcoin has to be higher to match the Dollar value. This means that if the Bitcoin-Dollar price goes up 10% your payoff is 9.9% and if it goes down 10% your BTC payoff is 11.1%.
What does a typical trade look like?
Example Inverse Futures:
You think that the price of bitcoin will increase against USD and buy 10,000 Bitcoin-Dollar Futures at 5,000 USD per bitcoin. Every Futures has a contract size of 1 USD. The price of bitcoin actually increases and you are able to sell the Futures at 6,000. Your PnL is calculated as:
( 1 / Entry Price - 1 / Exit Price ) * Position Size = (1 / 5,000 - 1 / 6,000) * 10,000 = 0.33 bitcoin
Example Vanilla Futures:
You think that the price of Ripple XRP will increase against bitcoin and buy 10,000 Ripple-Bitcoin Futures at 0.00005 bitcoin per Ripple XRP. Every Futures has a contract size of 1 XRP. The price of Ripple actually increases and you are able to sell the Futures at 0.00006. Your PnL is calculated as:
( Exit price - Entry price ) * Position Size = (0.00006 - 0.00005) * 10,000 = 0.10 bitcoin
Which maturity should I trade?
It depends on your trading objective. For instance, if you want to profit from a price move over the next couple of days, you might want to trade a shorter maturity (e.g. the perpetual), which has the most liquidity. If you want to arbitrage the CME Group contracts which have the same expiry time and index each Month, you can trade the Month contract. If you want to hedge your risk for a couple of months, the Quarter contract would be more suitable.
What happens if I hold a position until maturity?
Your position will be cash settled at a rate representing the underlying spot market.
Do you have a "socialized loss" system, "claw-backs" or something similar?
No. If you buy, we match you with a seller, and if you sell, we match you with a buyer. If you make a profit, this profit will come from other traders' losses on the platform. As a neutral exchange, we manage the margin of counterparties in real-time and transfer any profit and loss. If a liquidation can not be filled, it goes through an orderly equity protection process that attempts to first assign it to a marketmaker and then unwind the remainder of the position to avoid system losses as last resort. Thus, the risk management system is designed to not sustain losses that would require schemes like "claw-back".
Why do Futures prices differ from the spot prices?
In mature financial markets, this price difference is determined by technical factors such as interest rate differentials, dividends or storage costs. In the case of bitcoin and other digital assets, the price difference is mostly driven by supply and demand imbalances. For instance, bitcoin Futures have generally traded at a premium to the spot price in the past. This indicates that there is a high demand to buy bitcoin on a leveraged basis.