Perps and funding
What a perpetual is, how funding keeps its price near the index and how margin and leverage work.
A perpetual (perp) lets you take a long or short position on an underlying price with no expiry date. Because it never settles on a fixed date, something has to keep its price close to the real market. That mechanism is funding.
Index, mark and the book#
- The index is the reference price of the underlying.
- The mark is the perp's fair-value price. It is what margin and unrealized PnL are measured against.
- The book is where bids and asks sit. A trade executes at the book price, which can drift a little above or below the mark.
See Perpetuals for where each of these appears.
Funding#
Funding is a periodic payment between longs and shorts. It pushes the perp's price back toward the index.
- When funding is positive, longs pay shorts. This tends to happen when the perp trades above the index.
- When funding is negative, shorts pay longs. This tends to happen when the perp trades below the index.
In a standard perp design funding moves between traders rather than being a fee paid to the venue. The terminal shows it as Funding (1h), the rate for one hour. A position pays or receives funding in proportion to its size.
Funding APR#
The Markets page shows Funding APR. It takes the hourly rate and multiplies by 24 and then 365. For example, a steady hourly rate of 0.001% would show as about 8.76% a year. The figure is a simple annualisation for comparison and it is not compounded or forecast. Funding changes constantly.
Leverage and margin#
Leverage lets you hold a position larger than your account value. Two margin levels matter:
- Initial margin is what you need to open or increase a position. The ticket shows it as Margin Required.
- Maintenance margin is the minimum needed to keep a position open. If your account value falls below it, the position can be liquidated.
The ticket also shows Leverage: the order's notional value divided by your account value. Both need a linked account. Fee details are on Fees and margin.
Open interest#
Open interest is the total size of perp positions that are currently open. Detion shows it in dollars, using the index price. It tells you how much is at stake in a market, which is different from volume, the amount traded over a period.