How to calculate DigiFinex contract income

The calculation of contract income on DigiFinex involves determining the net profit/loss, funding fees, realized P&L, unrealized P&L, and total contract income.

Nov 25, 2024 at 04:08 pm

How to Calculate DigiFinex Contract Income

As a user of DigiFinex, calculating your contract income is essential for understanding your financial performance. This guide will provide you with a step-by-step explanation of the formula used to determine your contract income.

Understanding Contract Trading

Before delving into the calculation, it is crucial to grasp the fundamentals of contract trading on DigiFinex.

1. What are Contracts?
   Contracts are financial instruments that allow traders to speculate on the future price movements of an underlying asset, such as cryptocurrencies, commodities, or indices.

2. Types of Contracts on DigiFinex:
   DigiFinex offers two types of contracts:

   • Perpetual Contracts: These contracts have no defined expiration date and can be held indefinitely.
   • Delivery Contracts: These contracts have a predetermined expiration date and must be settled at the specified time.
3. Contract Valuation:
   The value of a contract is determined by multiplying the contract size by its notional value. For example, a contract with a size of 10 and a notional value of $100 would be worth $1,000.

Calculating Contract Income

Now that we have covered the basics, let's dive into the calculation of contract income.

1. Net Profit/Loss:
   The first step is to determine your net profit or loss on the contract. This can be calculated using the following formula:

   Net Profit/Loss = (Final Contract Value - Entry Contract Value) * Contract Size

   • Final Contract Value: The value of the contract at the time of closing the position.
   • Entry Contract Value: The value of the contract at the time of opening the position.
   • Contract Size: The size of the contract being traded.

2. Funding Fees:
   Funding fees are an adjustment factor used to reflect the difference in funding rates between the perpetual contract and the underlying spot market.

   • Funding Income: If the funding rate is positive, you will receive funding income.
   • Funding Expense: If the funding rate is negative, you will incur a funding expense.

   The funding fee can be calculated using the following formula:

   Funding Fee = Mark Price Contract Size Funding Rate * 8 hours

   • Mark Price: The fair value of the contract based on the underlying spot price.
   • Funding Rate: The difference between the perpetual contract interest rate and the underlying spot interest rate.
   • 8 hours: The default funding interval on DigiFinex.

3. Realized P&L:
   Realized P&L represents the total profit or loss that has been realized on the contract. This includes both the net profit/loss and the funding fees.

   Realized P&L = Net Profit/Loss + Funding Fee

4. Unrealized P&L:
   Unrealized P&L reflects the potential profit or loss if the contract position is closed at the current market price.

   Unrealized P&L = (Current Contract Value - Entry Contract Value) * Contract Size

5. Total Contract Income:
   Total contract income is the sum of realized P&L and unrealized P&L.

   Total Contract Income = Realized P&L + Unrealized P&L