Compared to Perpetual Futures prices, the Mark Price better estimates a contract’s ‘true’ value because it is less volatile in the short term. Phemex uses the Mark Price to prevent unnecessary liquidations and discourage market manipulations by bad actors.
How to calculate the Mark Price for perpetual futures contracts?
Mark price = Median* (Price1, Price 2, Contract Price)
**Price 1 = Price Index * (1 + Last Funding Rate * (Time until next Funding / Funding period)
**Price 2 = Price Index + Moving Average (15-minute Basis)
**Moving Average (15-minute Basis) = Moving Average ((Bid1+Ask1)/2- Price Index)
The Moving Average (15-minute Basis) is calculated by taking the average of the bid and ask prices and subtracting the Price Index, before taking the average of that value over the last 15 minutes, calculated every 1 minute.
The Phemex mark price is used to trigger liquidations and to compute unrealized PNL.
The last traded price, on the other hand, counts as the current market price. It will not necessarily be the same as the index price or mark price. Please note that when a user closes a position, the realized PnL will be calculated based on the last traded price, which may differ from the unrealized PnL that was displayed. With such a dual-price mechanism, users must closely monitor the differences between mark price and last traded price to avoid unexpected losses.
