Perpetuals – LIVE
Here is our guide to Spin's perpetual futures. Enjoy your reading!
Being on a mission to offer NEAR Protocol’s users a CEX-competitive trading experience, the Spin is pleased to announce our new trading tool – Perpetual Futures. The first perps contract – NEAR-Perp is already waiting for your first trade on the mainnet!
The experience of futures trading on Spin is quite similar to centralized exchanges. Still, for a few minor differentiators. Long story short, here's a quick lifespan of your futures trade on Spin:
- 1.Connect your NEAR wallet to Spin.
- 2.Deposit funds to a Margin Account (which is a smart contract). In the blockchain, all users' funds on margin accounts are placed in a vault, where each transfer is assigned a number to indicate the owner of funds.
- 3.Create a futures position by choosing the order type and direction and position size (the leverage will be adjusted).
- 4.The margin ratio for this position is temporarily locked on your account (the margin ratio size depends on the position size and asset volatility).
- 5.Closing or changing your position results in the funds being settled and unrealized PnL and funding amounts are either added to or deducted from your margin account balance.
- 6.Withdraw returns from the Margin Account to your wallet.
If you are new to the concept of perpetual futures, you will love our explanation - short and simple.
Perpetual contracts mirror the price of a certain pair of assets, in the case of NEAR-Perp it will reflect the price of NEAR/USDC. In the spot market, you profit from buying low and selling high, so basically, you only make money in uptrend markets. Perpetuals are different and allow you to earn income in any market.
If you think that the price will go up, you open a long Perpetuals position (buy), and if you are right, your profit will be equal to the difference between the price at which you entered the position and the price at which you closed it. If you think that the price will go down, you open a short position (sell) and earn on the difference between the entry and exit price levels. In this way, Perpetuals are like betting on the direction of future price action, if you like.
To trade Perpetual Futures, you need to have collateral to back your position. In the case of Spin, this is USDC, so you only need USDC to sell or buy NEAR-Perp. When you enter a position, a certain percentage of the value of the position (different for all markets) is locked on your balance – the collateral. To support your position in the event that the market goes in the opposite direction of your position, a margin balance (refers to the funds you have deposited for perpetual trading) is used.
If your bet on the next price move was correct, your uPnL ( unrealized Profit and Loss) will increase. When you close your position, realized PnL will be added to your balance – so happy ending. But if you, for example, open a long position, the market will go down, and you will not have enough funds to cover possible losses – your position will be liquidated. In extreme cases, collateral will be used to cover your losses.
Another important concept in perps trading is leverage. It allows you to increase the position size by several times and thereby increase the efficiency of your capital. But be careful, if you are trading with, say, x3 leverage, each price move will have 3x the impact on your PnL and margin balance, so it will deplete faster if the market moves in the opposite direction. On Spin, the maximum leverage is x10.
And… last but not least: funding rates. They are necessary in order for the prices of perpetual contracts to be closer to the spot prices. This is the periodic pay rate: if NEAR-Perps trade above the price of the NEAR oracle index, then long traders pay short traders; if these contracts trade below the spot market price, short traders pay long traders. These payouts occur when the user changes or closes their position and includes the sum of the funding rates for the entire period.