BitCoke crypto Quanto Swap
The increased demand for the latest exchange trading techniques has necessitated the expansion of the operational toolkit in a financial market environment. This has led to the emergence of secondary financial instruments. These include derivatives.
Their peculiarity is operations with fictitious capitals. Simply speaking, operations with fictitious means do not participate directly in production sector capital investment or credit banking operations. So what are derivatives, and why are they useful? In this article, you will learn about the BitCoke cryptocurrency derivatives trading platform and what BitCoke cryptocurrency derivatives trading is.
What a derivative is
A derivative is essentially a contractual basis between two parties (or more than two), which in turn is based on one or more assets (crypto-assets in our case).
The derivative is directly derived from the underlying asset's value fluctuations. The most common underlying assets are stock indices, currencies, interest rates, and various securities.
Which forms of derivatives are most common
Currently, there are several types of derivatives. Each of them is different in its way - they have their features and functionality. Let us consider the most popular ones.
Large institutions and organisations are more willing to enter into derivatives transactions than do business with the underlying assets alone. Swaps are designed to reduce risk in financial transactions.
The interest rate swap option can quickly become a debt with a fixed interest rate or a floating rate.
A currency option is used to reduce the impact of significant currency fluctuations. This way, the business can simplify the repayment of foreign currency debts in another country's currency.
There are a lot of nuances in the application of this instrument. It can seriously affect the operation of the business. And also, it may provoke various phenomena in the economy. Both positive and undesirable.
The primary purpose of swaps is to compensate and stabilise financial flows and mutual obligations. Due to this, the instrument can indirectly impact the quotation of certain resources. In the case of cryptocurrencies, the closest to conventional swaps are open-ended futures Quanto and exchange-traded swap contracts.
The term is the definition of a standard futures exchange contract for the purchase/sale of an asset with an agreement on the price level and delivery date.
The agricultural sector in which futures have emerged is a high-risk investment. Although there are relatively reliable forecasts, the slightest force majeure can change the situation and lead to a bad harvest, from it to a spike in the price of a particular product. Consumers receive the negotiated price by making a deal at the beginning of the next season, regardless of natural conditions or other factors. The same is true for crypto-assets.
Features of futures about other types of contracts:
- Transactions are only made for commodities whose value cannot be predicted several periods in advance. This is why crypto-asset trading is so popular.
- The conclusion of the futures contract may be accompanied by insurance that will guarantee both parties' performance or compensation from the clearing company.
- The futures risks are minimised by playing the producer/buyer price game as close to zero as possible in advance.
- The increased liquidity of such an asset is achieved by having clear terms of the transaction known to both parties to the contract well in advance of the actual delivery of the commodity. This allows you to hedge against unpredictable price spikes and future budget costs in the real market.
Forward is probably one of the most attractive financial instruments. In a civilised market, it protects the business from unforeseen circumstances. However, it can become a risk factor in its own right in other conditions.
A forward contract is an agreement between two parties to buy or sell an asset at a certain price in the future. A forward contract may be used to hedge or hedge against the negative consequences of a fall in the underlying asset price.
A forward contract is similar to a futures contract but differs mainly because forwards are not traded on a centralised exchange and are deemed over-the-counter instruments.
The following clauses are mandatory in free-form forward contracts.
- the subject of the transaction (underlying asset)
- delivery volume (in any suitable unit)
- fixed date of execution of the contract (cannot be changed)
- the place of transfer of the asset
- exercise price (remains unchanged)
- forward price (value of the asset at the time of the agreement)
About The BitCoke Quanto Swap
The BitCoke is a Hong Kong-based one-stop crypto trading platform featuring Quanto swap perpetual contracts. The Bitcoke derivatives trading platform are committed to integrating trading prowess with aspects of the crypto market to deliver a transparent, professional, and user-friendly experience for consumers while meeting the diversified needs of various investment entities such as retail customers, professional traders, investment institutions, etc.
The BitCoke cryptocurrency derivatives trading platform team consists of famed finance and blockchain venture capital specialists. The CEO has performed as the director of proprietary trading in a renowned investment bank and possesses comprehensive operation and management experience in the financial sector.
Quanto Swap Overview
BitCoke Quanto Swap in India contracts is essentially an inverse perpetual swap. From the perspective of trading, though, it is akin to future contracts in traditional finance with some subtle differences:
- It has no expiry or settlement date.
- Quanto swap allows perpetual hold of a contract by resembling a margined spot market, where most times, its price fluctuates in tandem with the underlying asset.
- Through Funding, Quanto Swap contracts can follow the spot Index price.
- In contrast to futures contracts, contango can be significant due to market fluctuation.
- Quanto Swap accepts 3 Settlement Coin assets (BTC, ETH, USDT) as margin to leverage trade all perpetual contracts available on BitCoke, as well as settle PnL.
When BitCoke trading Quanto Swap contracts, you need to comprehend the mechanism of leverage trading. The key elements you need to look into are:
- Position Liquidation: for Quanto Swap contracts, the system applies Mark price as the benchmark price for liquidation.
- Initial and Maintenance Ratio: these margin ratios determine the maximum leverage you can assign for a position and at what price liquidation is triggered.
- Funding: Fixed interval payments exchanged between the Long and Short sides every 8 hours. If the Funding Rate is favourable, then longs will pay, shorts receive Funding, and vice versa if the rate is negative. You will only pay or receive Funding if you hold a position at the Funding Timestamp.
- Funding Timestamps: UTC 00:00 (08:00 Hong Kong Time), UTC 08:00 (16:00 Hong Kong Time), and UTC 16:00 (00:00 Hong Kong Time).
You may review the Funding Rate on the current contract in Details on the top of the Perpetual page or click References - Funding Rates for all historical data.
It is essential to know about the BitCoke derivatives trading payment sequence.
Payment is first subtracted from the available balance in the Contract account if sufficient to cover the payment.
When the available balance is insufficient, the system cancels pending orders whose margin will be subtracted for payment.
If still insufficient, the system will deduct the added margin and margin of current positions in order on Fixed Margin mode. In contrast, on Cross Margin, the system will directly remove the account balance.
In any case, Funding payment will change the liquidation price for related positions.
Advantages of derivatives
- the opportunity to make a profit on the purchase and sale of a derivative asset at a low price
- provision of leverage
- good room for speculative politics
If you want to delve into BitCoke derivatives in India, you can use these positives to achieve your financial goals.
In real-time trading, BitCoke exerts a trading protection band over order prices, which mimics the concept of the Bolling band, rejecting buy orders at a price above up-limit sell orders below down-limit.
Trading protection band %:
- 1%: BTC、ETH、EOS、LTC、BCH、ADA、ETC、BSV、XRP
- 2%: TRX、LINK、DOT、XTZ、COMP、YFI、FIL、KSM、DOGE、XLM、CHZ
- 3%: BAND、UNI、THETA、OMG
For example, the current BTCUSD Index price is 6000 USD, the up-limit of the protection band is 6060 USD. If you submit a long order at a price above 6060 USD, the system will reject the order. Long charges at the cost of ≤6060 will be admitted.
Likewise, the down-limit of the protection band is 5940 USD. If a trader submits a short order at a price below 5940 USD, the system will reject the order. Short order at a price≥5940 USD will be admitted.
If you submit a market order, the system will reject and cancel part of the order whose execution price exceeds the trading protection band. In the case of market Stop Loss, the system will resubmit the order after rejection until the whole position is closed at execution prices within the protection band.
How to make money trading derivatives
Traders earn money depending on the price fluctuations of the cryptocurrency of interest. All traders take some risk because no one can know for sure what the currency's value will be in the future. If the asset goes up in value, the buyer stands to gain. If it goes down in value, the seller stands to gain.
To increase the level of profit, a trader can use leverage. Leverage multiplies possible profit many times. The size of available leverage depends on the chosen trading platform. Also, a commission will have to be paid for the leverage.
An investor who wants to succeed in this market must first study and assimilate a lot of information. However, everyone starts somewhere. Doing business with derivatives is not easy in any case. However, no worthwhile endeavour is too simple in the long run. Learn to start earning more, and most importantly, have fun with your activities. Register now to try your hand at it. Wish you the best of luck!