Perpetual Contract is a financial derivatives product that has combined the advantages of both spot and futures trading. Perpetual Contract is trading the real-time prediction of the price of a particular asset. The following are four main aspects involved in a perpetual contract.
1. No Expiry Date nor Settlement
In contrast to spot trading which requires immediate settlement perpetual contracts do not have an expiry date nor any daily settlements. Also, unlike other futures contracts, perpetual contracts do not need to consider rollover costs and has the advantage of traders being able to manage their funds with flexibility. Furthermore, perpetual contract prices converge to spot market prices (AKA Mark Price) via funding rates. When trading, Traders should keep close attention to the funding fees that are being paid or received that occur every 8 hours.
2. Mark Price Anchor (Dual Price Model)
MCS uses a mechanism called 'Funding' to anchor MCS' market price with the prices of the spot market. Furthermore, leveraging the mark price, MCS uses the Dual Price Model which protects traders from unnecessary liquidations that occur due to market manipulation and ensure a fair trading environment. Market manipulation causes abnormal price fluctuations which may cause malicious liquidations on the traders’ positions and result in an unfair trading environment. The Mark Price on MCS can be regarded as the real-time average spot price in major spot exchanges that provides BTC/USDT pairs.
3. Up to 100:1 Leverage
MCS provides a up to 100x leverage to trade perpetual swaps. Unlike the spot margin trading or futures trading that respectively provides 3~5x or 5~20x leverage, MCS provides traders with greater flexibility in managing their portfolios. Therefore, with the ease of adjusting leverage and margin of an open position at any time, it allows high flexibility managing risk to maximize the trading experience.
4. Auto-Deleveraging (Contract Loss Mechanism)
In the event of liquidation, a contract loss may occur when the position cannot be liquidated at a price that is better than the bankruptcy price. If the loss cannot be covered by the insurance fund, the system will automatically deleverage the opposite position that is the most profitable and highly leveraged to make up for the loss of the contract. The auto deleveraged trader's position will be matched with the bankruptcy price of the position with contract loss. This system only affects a few traders who are highly profitable and leveraged. Thus, this protects other low-risk traders from being a part of the system loss due to a single risky trader. Traders can lower their ranking by reducing their leverage or closing some of their positions.