MEXC contract calculation formula

Understanding MEXC's contract calculation formula, with components like the underlying asset price, contract multiplier, and funding rate, is crucial for optimizing trading strategies and risk management.

Nov 15, 2024 at 05:24 pm

MEXC Contract Calculation Formula: A Comprehensive Guide

Introduction

MEXC, a leading cryptocurrency exchange, offers a comprehensive suite of contract trading services. To ensure accurate and transparent trading, MEXC employs a rigorous calculation formula that determines the value of contracts based on the underlying asset price. Understanding this formula is crucial for traders to optimize their trading strategies and manage risk effectively.

Key Components of the MEXC Contract Calculation Formula

1. Underlying Asset Price: The underlying asset price is the spot price of the cryptocurrency or asset being traded on the contract. This price is sourced from MEXC's real-time market data and is used as the basis for calculating the contract value.
2. Contract Multiplier: The contract multiplier is a pre-determined value that indicates the number of units of the underlying asset that each contract represents. For instance, a contract with a multiplier of 100 will represent 100 units of the underlying asset.
3. Contract Price: The contract price is the value of a single contract based on the underlying asset price and the contract multiplier. It is calculated using the following formula:

Contract Price = Underlying Asset Price * Contract Multiplier

4. Funding Rate: The funding rate is a periodic payment made between traders on opposite sides of a contract to maintain market equilibrium. The funding rate is calculated based on the difference between the contract price and the spot price and is intended to encourage long-term stability in contract pricing.
5. Mark Price: The mark price is an estimated reference price of a contract that is used for margin calculations and liquidation. It is determined based on the weighted average of all executable orders in the order book.

Steps Involved in Calculating Contract Value using the MEXC Formula

1. Identify the Underlying Asset Price:

• Determine the current spot price of the cryptocurrency or asset being traded on the contract.
• MEXC provides real-time market data to obtain the most up-to-date price information.

2. Determine the Contract Multiplier:

• Check the contract specifications to find the pre-determined multiplier.
• The multiplier will indicate the number of units of the underlying asset represented by each contract.

3. Calculate the Contract Price:

• Use the formula "Contract Price = Underlying Asset Price * Contract Multiplier" to calculate the contract price.
• This calculation provides the value of a single contract based on the underlying asset price and the multiplier.

4. Consider the Funding Rate:

• If the funding rate is positive, long positions will pay short positions, and vice versa.
• Take into account the funding rate while managing trades to optimize returns or minimize losses.

5. Estimate the Mark Price:

• The weighted average of executable orders in the order book is used to determine the mark price.
• Margin calculations and liquidation processes utilize the mark price as a reference.

Examples of Contract Value Calculation

Example 1: Calculating the Value of a Bitcoin (BTC) Contract

• Underlying Asset Price: $50,000
• Contract Multiplier: 100
• Contract Price: $50,000 * 100 = $5,000,000

Example 2: Calculating the Value of an Ethereum (ETH) Contract

• Underlying Asset Price: $4,000
• Contract Multiplier: 50
• Contract Price: $4,000 * 50 = $200,000