Ethereum Contract

Ethereum Contracts introduction

BFX ETH contract is a standardized trading contract created by crypto asset trading platform BFX. BFX Bitcoin contracts are perpetual, and can be traded at any given time. There is no settlement date in the contract, a BFX Bitcoin contract will only be automatically liquidated when there is insufficient maintenance margin.

ETH Contract Specifications

Product Ethereum(ETH)
Underlying Asset Ethereum Price Index (EPI)
Minimum tradable unit 10 ETH
Pricing Unit USD/ETH
Minimim tick $0.0001/unit
Contract Type Perpetual Contract
Price fluctuation Range Ethereum Price Index ±5%
Trading Hours 24/7

Trading Rules

P/L calculations

BFX ETH Contracts utilizes USDT, which is pegged to USD at 1:1 ratio, as margin deposits and the P/L calculation equation is as follows:

Profits (or Losses)= price margin*Contract Size*number of contracts

Definitions:

  1. Price margin: The difference between market price and average cost of one’s contracts.
  2. Contract Size: Contract size is the deliverable quantity of commodities or financial instruments underlying futures and options contracts that are traded on an exchange.

P/L calculations examples:

Let’s suppose A opened a long position on Bitcoins at $8,000/contract for 10 contracts. The total value of A’s contracts is 8000*1*10=$80,000.

  • Now assume Bitcoin’s value increased to $8,100, then the P/L is (8,100-8,000) *1*10=$1,000
  • If A used 20 times leverage(5% margin deposit), then total capital used would be $4,000 a $1,000 profit would mean 25% ROI.
  • Now assume Bitcoin prices fell to $7,900 then A’s losses would be (8000-7900)×1×10=100×10=$1,000
  • If A uses 20 times leverage (5% margin), the principal is 4000 USD, the loss is 1000 USD, and the loss is 25%.

(For simplicity’s sake, transactions fees were excluded from the above calculations.)

Quotation Restrictions

Quote means that you can open a long position (bullish) and open a short position (bearish) according to your judgment of the market trend; accordingly, you can also autonomously carry out the operations of long positions and short positions. However, in order to curb the adverse impact of sudden abnormal price fluctuations on market prices, we have made the following mandatory requirements for your open and close quotes:

The sustainable contract normal trading price deviation from the price index is generally not more than 5%. For example, the current Bitcoin price index is 8,000 U.S. dollars, with a 5% price index deviating from a minimum of 7,600 U.S. dollars and a maximum figure of 8,400 U.S. dollars. The highest quoted price for long positions is 8400 U.S. dollars, and the highest short selling price is 7,600 U.S. dollars. If the index price is $8,100, the lowest and highest bids are $7,595 and $8405.

Take Profit and Stop Loss

Take Profit: This function allows users to set a certain price and allow the system to automatically sell the asset in order to profit from their positions. The system will trigger when there’s a 0.1% price difference above the set price.

Example on the Take Profit function: If user A bought a contract at $8,000 and wishes to take long position, then he/she can set the Take Profit price at $8,400 taken the 0.1% price difference into consideration the system will execute the sale at $8,408.4.

Stop-Loss: This function allows users to set a certain price and allow the system to automatically sell the asset in order to prevent further losses. The system will trigger when there’s a 0.1% price difference above the set price.

Example on the Stop Loss function: If user B went long at $8,000 per contract and used 10 times leverage then he/she would lose all the capital at $7,200. In order to prevent that from happening he/she could set the Stop Loss price at $7,500 taken the 0.1% price difference into consideration the system will execute the sale at $7,507.5

It should be noted that:

  1. To prevent systemic risk caused by big deviations of your hanging price and market price, we prevent you to fill in the trigger price. We automatically take the deviation price of 0.1% of your intent order price as the trigger price;
  2. When one of Take Profit or Stop Loss function is triggered the other one is automatically disabled. For example: when the Take Profit is triggered an order would be posted, regardless of the status of the order it will not be automatically withdrawn and the Stop Loss function will be disabled unless you manually withdraw the order and reset the Stop Loss price.
  3. The Take Profit and Stop Loss function only work with your currently available contracts.
  4. To lower the systematic risk BFX only post the orders for you, that does not mean those orders will definitely get executed. Users should acknowledge the risk involved and shouldn’t overly depend on those functions.

Margin Call

BFX requires its users to maintain an account balance, aside from the margin account, larger than the actual loss. The system will calculate the actual P/L using the user’s average cost on the contracts and the index price. When the index price hits the force liquidation point, BFX will place a buy order (if the user took short position) or a sell order (in case the user took long position) equal to the amount of his/her margin balance plus the aforementioned account balance. Note that, BFX only places the order for you we cannot guarantee they will get executed. If the orders were all executed between the force liquidation price and the margin call price, the remaining maintenance margin still belong to the user, if those order were not all executed within a minute then BFX will sell off the same amount of orders from the counterparty with the most profits.

Force Liquidation Price: Force Liquidation Price refers to the price that BFX forcefully liquidates your contracts, when your maintenance margin is insufficient to cover your losses. In the case of 20 times leverage, in order to facilitate trading, BFX will set the Force Liquidation Price 1% above the margin call price. After the sale is facilitated, the remaining margin balance, if any, still belongs to the user.

Maintenance Margins: The margin needed to maintain your current position.

Funds in Reserve: Total funds transferred into the contract account minus the cost of the contracts, maintenance margin and varies fees.
(Transfer-in Amount of the Contract - Transfer-out Amount of Contract - Open Position Margin - Order Frozen Amount - Open Position Fee - Hanging Order Fee)

Funds in Use: Refers to the amount deducted from Funds in Reserve when the user has suffered a loss.

Available Balance: Funds in Reserve minus the losses. The available balance can be used to place new orders.

Contract Adjustment Ratio: For 20 times leverage, the Contract Adjustment Ratio is 20%.

Force Liquidation Price:
(Close price - Average price of position) * Number of positions + (Contract Available + Margin + Reserve Fund Amount) / Margin - Contract Adjustment Factor = 0

Burned Position Price:
(Close price - Average price of positions) * Number of positions + (Contract available + margin + occupancy amount of reserve fund ) / Margin = 0

System Automatic Sale mechanism

When the Force Liquidation Price has been reached, users’ position will be forcefully liquidated, if not all of the contracts have been executed within a minute BFX will sell off positions held by the counterparty that profited the most until all remaining contracts are sold.

For example,30 Bitcoin contracts has been liquidated and 20 contracts were still remaining after one minute. Assume there were 4 counterparties A, B, C and D holding 5,10,20 and 30 contracts respectively. As a result, 5 of A’s contracts, 10 of B’s contracts and 5 of C’s contracts will be sold off.

Disclaimer:BFX reserves the right to change and modify relative trading rules in response to changes in the market or industry. In an event of change of rules, BFX will send out announcement ahead of time on all official channels. However, BFX cannot guarantee that all users can be notified in time. Please stay up to date on our announcement section of the official website in order to better protect your interests. Also, the definitions and examples of terms given by BFX only serves as a tool to better help you understand the rules, we cannot guarantee their 100% accuracy, BFX is not responsible for any losses incurred.

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