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What is the funding rate of an OKEx perpetual contract?
On OKEx, the funding rate ensures the perpetual contract price tracks the underlying asset price, with positive rates paid by buyers when the contract price is higher, and negative rates paid by sellers when the contract price is lower.
Oct 26, 2024 at 04:18 pm
What is the Funding Rate of an OKEx Perpetual Contract?
1. Definition of Funding Rate
The funding rate is a periodic payment made between buyers and sellers of a perpetual contract to ensure that the price of the contract tracks the underlying asset price as closely as possible.
2. Mechanism of Funding Rate
- Positive Funding Rate: When the price of the perpetual contract is higher than the underlying asset price, buyers (long positions) pay sellers (short positions). This encourages traders to close their long positions and open short positions, bringing the contract price closer to the underlying asset price.
- Negative Funding Rate: When the price of the perpetual contract is lower than the underlying asset price, sellers pay buyers. This encourages traders to close their short positions and open long positions, which pushes the contract price closer to the underlying asset price.
3. Funding Interval and Frequency
On OKEx, the funding rate is calculated and paid every 8 hours:
- UTC Times: 00:00, 08:00, 16:00
4. Calculation of Funding Rate
The funding rate is calculated using the following formula:
Funding Rate = (Premium Index - Perpetual Contract Mark Price) / Perpetual Contract Mark Price x 8 / 100- Premium Index: A fixed rate set by OKEx that represents the fair value of the contract based on market conditions.
- Perpetual Contract Mark Price: The current weighted average price of the perpetual contract.
5. Example
Suppose the Premium Index is 0.01 and the Perpetual Contract Mark Price is 1,000.
- Positive Funding Rate: If the contract price is 1,002, then the funding rate would be ((0.01 - 1,002) / 1,002) x 8 / 100 = 0.0008% per 8 hours.
- Negative Funding Rate: If the contract price is 998, then the funding rate would be ((0.01 - 998) / 998) x 8 / 100 = -0.0008% per 8 hours.
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