As the digital currency market, led by Bitcoin, continues to expand, diverse derivative trading instruments have emerged alongside spot trading. These instruments serve as risk-hedging tools, with contract trading being the most prominent.
What Is Contract Trading?
Contracts are the most common form of trading agreements in the digital asset derivatives market. Digital asset contract trading refers to an agreement between buyers and sellers to transact a specific asset at a predetermined price and future date.
This allows investors to profit not only from price appreciation in spot trading but also from price fluctuations via long (buy) or short (sell) positions. For example:
- Long BTC: Profits if BTC rises; losses if it falls.
- Short BTC: Profits if BTC falls; losses if it rises.
Contract trading enables gains during market downturns and offers hedging opportunities. Leverage further amplifies potential gains (and risks), making it a high-stakes tool suitable only for experienced traders.
Types of Contract Trading
OKX offers two primary contract products based on settlement dates: Perpetual Contracts and Delivery Contracts. These are further categorized by margin types:
1. Delivery Contracts
Delivery contracts have fixed expiry dates. Upon expiry, open positions are settled automatically at the arithmetic average of the index price over the last hour. OKX provides four settlement cycles:
- Weekly
- Bi-weekly
- Quarterly
- Bi-quarterly
2. Perpetual Contracts
These contracts have no expiry. To align perpetual contract prices with spot prices, a "Funding Fee Mechanism" adjusts fees every 8 hours (08:00, 16:00, and 24:00 HKT). Fees are exchanged between long and short positions based on the funding rate.
3. Coin-Margined Contracts
Collateral is held in the traded asset (e.g., BTC for BTC contracts). Profits/losses are settled in the same coin, making these ideal for hedging existing holdings.
4. USDⓈ-Margined Contracts
Stablecoins (USDT/USDC) serve as collateral, enabling multi-coin trading without holding individual assets. Profits/losses are settled in USDT/USDC, simplifying calculations and reducing volatility risk.
How Contract Trading Works?
Step 1: Select Contract Type
Choose between perpetual/delivery contracts and decide on long/short positions based on market analysis.
Step 2: Set Margin Mode
- Cross-Margin: Balances are shared across positions.
- Isolated Margin: Margins are locked per position.
Step 3: Enter Trade Parameters
Specify order type (limit/market), price, and quantity. Ensure sufficient equity to cover margin requirements.
Step 4: Monitor & Adjust Positions
Close positions to lock profits or mitigate losses. Delivery contracts auto-settle upon expiry.
Step 5: Settlement
Unclosed delivery contracts are settled at the index price. Profits are credited to the "Realized P&L" section.
FAQ
Q: Can I switch margin modes mid-trade?
A: Only when no positions are open.
Q: How are funding fees calculated?
A: Fees = Position Value × Funding Rate. Positive rates charge longs; negative rates charge shorts.
Q: What’s the minimum leverage?
A: Varies by contract. Check OKX’s specifications.
Risk Disclaimer: Digital asset trading involves high risks. Use leverage cautiously and ensure you understand the product mechanics.