CoinEx science popularization: What is a USDT-M contract?

1. USDT-M contract — a type of perpetual contract

Although perpetual contracts are similar to traditional futures contracts, they have no expiration or settlement date. So what is a USDT-M contract? Actually, as a type of perpetual contract, USDT-M contract is also called positive contract and stablecoin contract in the encryption market. It takes USDT as the pricing unit and anchors the spot market price through the capital cost mechanism; Users may buy long or sell short contracts to obtain the profit from the increase or decrease of digital currency price by judging the price change.

There is another type of perpetual contract — Coin-M contract, also known as reverse contract. The biggest difference between the USDT-M contract and Coin-M contract lies in that the USDT-M contract takes the pricing currency USDT as the margin, while the Coin-M perpetual contract takes the transaction currency (such as BTC) as the margin.

How to understand it? Specifically, all contracts in the USDT-M contract market take the pricing currency USDT as the margin. Users only need to hold USDT to participate in the transactions in each contract market of USDT-M contracts. But Coin-M contracts take the transaction currency (such as BTC or ETH) as the margin. Users need to hold the corresponding currency to participate in the transaction of the contract market. For example, for BTC/USD Coin-M perpetual contracts, users need to transfer BTC as the margin.

2. How to understand the margin in two modes?

The margin code can be divided into cross margin and isolated margin.

In the cross margin mode, all available account balances can be used as the margin for the current position. When the position margin is lost to only maintain margin, the system will automatically call the margin to the initial margin from the available balance of the perpetual account. If all available margin cannot reach the level of maintaining margin after being called, the forced liquidation will be implemented instead of margin addition. However, the position margin in isolated margin mode can only be used as the current position margin. And the system will not call the margin unless users manually operate it.

Generally, the CoinEx contract transaction defaults to the cross mode, and the leverage can be adjusted in the cross/isolated mode. However, it should be noted that when an order is processing, users may not switch between cross and isolated mode, and the leverage cannot be changed as well.

3. How to estimate the unrealized profit and loss?

Users pay more attention to profits and losses in contract transactions. So how to estimate the unrealized profit and loss?

Based on the difference between the average opening price and the mark price, the unrealized profit and loss is an estimated value of the position profit and loss, which will be reflected in the users’ position information after users successfully open the position. We provide the following calculating formula for reference:

Unrealized profit and loss of multiple positions = contracts quantity * contracts face value * (1/average opening price-1/mark price)

Unrealized profit and loss of short position= contracts quantity * contracts face value * (1/ mark price-1/ average opening price)

(PS: The unrealized profit and loss will not affect the final profit and loss of trading users, while the realized profit and loss is the final profit and loss of users. The realized profit and loss includes capital expenses, transaction handling charges and the profit and loss settlement of position reduction and closing. Buyers and sellers of perpetual contracts need to pay or collect capital fees every 8 hours daily. When the collection or payment is completed, there will be a realized profit and loss.)

In addition, the calculator function in CoinEx contracts can also help users estimate their own profits in contract transactions. Suppose user A buys long through putting 10 times leverage of the cross in the BTCUSDT market. When the user buys 0.5 BTC at 40000USDT opening price and 42000USDT closing price, then the user’s estimated profit is 1000USDT.

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