Does Poloniex contract have overnight fee?

On Poloniex, perpetual contracts incur an overnight fee for positions held after 10:00 UTC, calculated based on the fee rate, position size, and multiplier, which varies depending on the underlying asset and market conditions.

Nov 23, 2024 at 06:34 pm

Does Poloniex Contract Have Overnight Fee?

Understanding Overnight Fees in Cryptocurrency Perpetual Contracts

Perpetual contracts are a type of derivative financial instrument that allows traders to speculate on the future price of an underlying asset, such as cryptocurrency. Unlike traditional futures contracts, perpetual contracts do not have a fixed expiration date and can be held indefinitely. However, traders holding perpetual contracts overnight are typically charged an overnight fee, which is a financing cost for maintaining the position.

Overnight Fees on Poloniex

Poloniex, a popular cryptocurrency exchange, offers perpetual contracts on a range of cryptocurrencies. The exchange charges an overnight fee for positions held open after 10:00 UTC. The overnight fee rate varies depending on the underlying asset and market conditions. Traders can view the current overnight fee rates on Poloniex's website.

Calculating Overnight Fees

The overnight fee for a perpetual contract is calculated as follows:

1. Overnight Fee Rate: The overnight fee rate is a fixed percentage that is charged per day for holding a position open overnight.
2. Position Size: The position size is the notional value of the contract, which is the underlying asset price multiplied by the contract size.
3. Multiplier: The multiplier is a factor that is used to adjust the overnight fee rate based on the leverage used.

Formula:

Overnight Fee = Overnight Fee Rate * Position Size * Multiplier

Example:

Let's calculate the overnight fee for a 1 BTC perpetual contract on Poloniex, assuming the overnight fee rate is 0.01% and the leverage is 10x.

• Position Size = 1 BTC * $20,000 (current BTC price) = $20,000
• Multiplier = 10x
• Overnight Fee = 0.01% * $20,000 * 10x = $0.20 per day

Steps to Calculate Poloniex Overnight Fee

1. Determine the Overnight Fee Rate: The overnight fee rate for the desired cryptocurrency can be found on Poloniex's website.
2. Calculate the Position Size: Multiply the underlying asset price by the contract size.
3. Identify the Multiplier: The multiplier is based on the leverage used. For example, a leverage of 10x means a multiplier of 10.
4. Apply Formula: Use the formula provided above to calculate the overnight fee.

Other Factors Affecting Overnight Fees

In addition to the overnight fee rate and position size, other factors can affect the overnight fee, such as:

• Market Volatility: Overnight fees may be higher during periods of high market volatility.
• Interest Rates: Overnight fees may be influenced by interest rates in the underlying asset's market.
• Liquidity: Overnight fees may be higher for contracts with lower liquidity.

Managing Overnight Fees

Traders need to carefully consider overnight fees when holding perpetual contracts overnight. Overnight fees can significantly impact the profitability of trades, especially for positions held over extended periods. To minimize the impact of overnight fees, traders can:

• Reduce Leverage: Using lower leverage reduces the multiplier, which in turn reduces the overnight fee.
• Close Positions Before Expiration: Traders can avoid overnight fees by closing their positions before the 10:00 UTC cutoff time.
• Consider Funding Rates: Perpetual contracts are usually funded, meaning that traders holding long positions pay funding to traders holding short positions. Traders can consider the funding rate when evaluating overnight fees.