Profit and Loss Calculation
1. What is a Perpetual Contract?
Perpetual contract is an innovative financial derivative. This contract is similar to traditional futures contracts. But the biggest difference is that perpetual contract has no expiration date or settlement date, and users can hold positions indefinitely.
Perpetual contracts introduce the concept of spot price index, and mechanisms such as funding rate, to match the price of perpetual contracts to spot index prices. Investors can enter either into a long (profit from upward trend) or short (profit from downward trend) position.
2. Cross Margin and Isolated Margin
Cross Margin: All the balances of investors are transferred to the perpetual contract account, and the profit and loss by all contracts will be used as the contract's position margin.
Isolated Margin: The margin required when opening a position will be used as the fixed position margin of the contract.
WenX adopts the isolated margin model.
3. What is a vanilla contract | USDT Contract?
A vanilla contract is also called USDT contract, the asset used in pricing and settlement are calculated in USDT.
For example, BTC/USDT vanilla contract, BTC is the underlying asset, USDT is the pricing and settlement asset.
For vanilla contracts, as long as you hold USDT, you can directly trade perpetual contract in multiple mainstream assets, instead of holding multiple currencies and do one-to-one correspondence trades, which is very convenient.
4. What is an inverse contract | Coin Contract?
An inverse contract is also called Coin Contract, the asset used in pricing is USDT while the settlement is calculated in the underlying asset.
For example, BTC/USDT inverse contract, USDT is the pricing asset, while BTC is the underlying and settlement asset.
Inverse contracts need to hold the underlying asset before conducting trade in coin contract. If you want to trade Bitcoin contracts, you must have Bitcoin as your base asset to trade BTC/USDT inverse contracts. Therefore, even if the user does not trade, there is a certain currency risk.
5. How is the WenX exchange index calculated?
The underlying index price is calculated based on the spot market prices of multiple top exchanges and weighted in different proportions. It is a key indicator for calculating unrealized profit and loss and determining position risk in perpetual contracts.
To ensure the spot index price accurately reflects the spot market price of each token, we have carefully selected the market prices of 3 or more major exchanges as the weighted index constituents for each token. Measures are introduced to handle abnormal situations.
6. List of Spot Index Constituents
Vanilla Contract: https://wenx.zendesk.com/hc/articles/
Inverse Contract: https://wenx.zendesk.com/hc/articles/
7. How much leverage does WenX provide?
The leverage of BTC multiples up from 1 to 100 times;
The leverage of ETH, EOS, BCH, LTC, XRP, BSV, and LTC contracts is 1-50 times.
8. What is a contract multiplier?
The contract multiplier represents the size of a contract
One inverse contract represents 1 USD
9. What is Maker and Taker?
Maker is a liquidity provider, while Taker is who takes liquidity out of the market
A Maker is a market depths maker. Any unfulfilled orders resulting from differences in prices will be added to the depth chart of the order book on the exchange. These pending/unfulfilled orders provide the exchange with market depths allowing traders to view the liquidity of that particular asset. However, there may be some occasions when an order is not reflected in the order book but is still in the queue.
A Taker is take away liquidity. When a newly placed order matches a pending order, the new order will immediately be fulfilled and it will take away the pending/unfulfilled order from the exchange market depths.
Profit and Loss Calculation
1. What is unrealized profit and loss and realized profit and loss?
Realized Profit and Loss: the actual profit obtained from closed positions can be used as margin or withdrawn;
Unrealized Profit and Loss: the profit and loss of all positions in the current contract without closing positions, also known as floating profit and loss.
2. Realized profit and loss calculation for vanilla contract
Open Long: realized profit and loss = (contract multiplier * average closing price - contract multiplier * average opening price) * number of closed positions
Open Short: realized profit and loss = (contract multiplier * average opening price - contract multiplier * average closing price) * number of closed positions
a user opens long for 100 BTC vanilla contracts at an average opening price of 800 USDT/BTC, and then closes 100 contracts at an average closing price of 1600 USDT/BTC, the contract has realized profit and loss = (1600*0.0001 -800*0.0001) * 100 = 8 USDT
3. Realized profit and loss calculation for inverse contract
Open Long: realized profit and loss = (contract multiplier / average opening price - contract multiplier / average closing price) * number of closed positions
Open Short: realized profit and loss = (contract multiplier / average closing price - contract multiplier / average opening price) * number of closed positions
a user opens short for 600 BTC inverse contracts at an average opening price of 5000 USDT/BTC, the latest trading price is 6000 USDT/BTC, the unrealized profit and loss of the contract = (1 / 6000-1/5000) * 600 = -0.02 BTC.
1. What is forced liquidation?
The margin rate required by the user to maintain the current position, if it is less than or equal to the minimum margin rate, it will trigger liquidation.
2. What is the initial margin?
Initial margin is the minimum margin required to open a position = contract multiplier * quantity * price / leverage
3. What is the maintenance margin rate?
The maintenance margin rate is the minimum margin rate required to maintain the current contract position. When the margin rate is less than or equal to the maintenance margin rate, liquidation will be triggered. The maintenance margin rate is used to calculate the liquidation price.
Margin rate = 1/actual leverage ratio = (position margin + unrealized profit and loss) / current position value
4. How is the estimated liquidation price calculated?
Long position liquidation price = (opening value - initial margin + transaction fee - margin call) / ((1-maintenance margin rate) * contract multiplier * number of lots)
Short position liquidation price = (opening value + initial margin - transaction fee + margin call) / ((1 + maintenance margin rate) * contract multiplier * number of lots)
Margin rate = (position margin + unrealized profit and loss) / current position value = (position margin + unrealized profit and loss) / (number of positions * contract multiplier * latest trading price)
Long position liquidation price = ((1 + maintenance margin rate) * contract multiplier * number of lots) / (open position value + initial margin - transaction fee + margin call)
Short position liquidation price = ((1 - maintenance margin rate) * contract multiplier * number of lots) / (open position value - initial margin + transaction fee - margin call)
Margin rate = (position margin + unrealized profit and loss) / current position value = (position margin + unrealized profit and loss) / (number of positions * contract multiplier / latest trading price)
Assuming that the latest trading price of BTC is $10,000, the user chooses 10 times leverage and opens a long contract worth 1 BTC, corresponding to 10,000 contracts, at risk limit level 1, and maintenance margin ratio = 0.5%.
At this time, the user's initial margin rate=1/10=10%
Margin = contract multiplier * number of contracts / (latest trading price * leverage multiplier) = 1*10000/(10000*10)=0.1BTC
The liquidation price is (assuming that the transaction fee is 0): ((1 + maintenance margin rate) * contract multiplier * number of lots) / (opening value + initial margin - transaction fee + margin call) = ((1+0.5% ) * 10000 * 1 / ((10000 * 1 / 10000)) - 0 + 0.1) = 9136.36
5. Will I lost more than my capital margin?
No, WenX has a well-designed margin and liquidation mechanism, which ensures that the margin balance of each contract account will not be less than 0.
6. Will WenX distributes the loss to users?
WenX uses an auto-deleverage mechanism that prioritizes deleveraging users with high leverage and high profits, so there is no need to "distribute the loss".
7. What is the auto-deleverage mechanism?
When a user is forced to close a position, the remaining position of the user will be taken over by the system. If the forced liquidation position fails to be liquidated at the liquidation price in the market, and the insurance fund is insufficient to cover the loss, the system will trigger the auto-deleverage mechanism. The auto-deleverage mechanism will liquidate users who hold positions in the opposite direction. The order of liquidation will be determined according to leverage and profitability.
1. What is the funding rate?
The perpetual contract uses a funding mechanism to anchor the market price of the perpetual contract to the spot price.
Funding fees are charged every 8 hours, and the collection time is 4:00, 12:00 and 20:00 after the settlement of the contract every day. When holding a position at that moment, the user only needs to pay or collect funds. If the position is closed before the fee is charged, no funding fee is required.
2. How to calculate the fees of perpetual contract?
Fees of vanilla contract = contract multiplier* number of contracts * transaction fee rate * trading price
Fees of inverse contract = contract multiplier* number of contracts * transaction fee rate / trading price
Example: Jason opens long 100 BTC vanilla contracts at a trading price of 8000USDT (the contract multiplier is 0.0001 BTC). If his transaction fee rate is 0.05%, then the transaction fee required for this trade is 0.0001 BTC / contract * 100 contracts * 0.05% * 8000 USDT/BTC = 0.04 USDT
3. What is a 100% reserve asset?
WenX can withdraw reserve assets at any time to protect the interests of users. The 100% reserve refers to the platform reserve ratio (platform reserve/total platform user funds) not less than 100%. The 100% reserve asset signifies that it can truly guarantee the security of an exchange’s assets and is a way to prove the security of the exchange’s assets.
4. If I have questions, who should I contact?
Please contact online customer service, our customer service will contact you as soon as possible.