Discovering Xena Listed Perpetuals — Leveraged Cryptocurrency-Settled Derivatives
Soon, on February 18, 2019, Xena Exchange will add a section for trading Xena Listed Perpetuals – cryptocurrency-settled derivative contracts – separate from the existing spot engine. This article describes both the selling points of Xena Exchange derivative contracts and the reasons development in this direction is crucial for the market.
Xena Listed Perpetuals
Xena Listed Perpetuals – perpetual contracts with a leverage up to x100. The absence of expiry dates and reflection of the current spot price of the underlying asset is the key difference between perpetuals and futures, and the presence of leverage means that the trader can potentially receive more significant profits while managing fewer resources.
“Transactions with contracts for Bitcoin have financial guarantees, which increases the investment attractiveness of the asset. Capital inflows from traditional and institutional investors help stabilize the market and reduce volatility. Similar tools have been used for many years to reduce the likelihood of losses in traditional financial markets. This is an effective practice, and we should learn from it.”
Anton Kravchenko,
CEO Xena Exchange
With Xena Listed Perpetuals contracts, traders will be able to be both in longs and shorts, guided by the classical principle of “buy low, sell high.” However, unlike underlying asset trading, in the case of perpetuals, a trader can first sell a contract and then buy it at a better price. Thus, traders can make a profit from the fall in prices of the underlying asset.
Margin Trading Features
The margin trading of Xena Listed Perpetuals means that a trader can take a position on a specific asset, paying only a part (usually 1% to 10%) of the value of this asset. On Xena Exchange, the maximum leverage is 100x, which opens up tremendous opportunities for traders.
Say you have $10,000, and you buy 2.5 BTC at a price of $4,000. The rate is growing, and after a week, the price is not $4,000 but $4,200. As a result, you have managed to earn $500. And what if you were trading with leverage?
The same situation as before: You open a position in margin trading at x100 and buy 250 BTC. If the growth persists, you will earn $50,000. However, you have to keep in mind that margin trading significantly increases not only profits but also losses.
The accidental liquidation of positions in the margin is a frequent problem for traders in the cryptocurrency market. It is not unusual that rates move sharply up or down from the normal price, the margin call is on for the user, the positions are liquidated, and the price returns to normal. Such movements are called “spikes.”
To protect the trader from such situations, Xena Perpetuals use a narrow scope for prices. All transactions should be made only within the limits of the scope. The scope moves up or down if the best bid or ask for some period is close to the corresponding scope limit. Thus, if the price of the underlying asset abruptly exceeds the scope limits, does not receive confirmation of its price by other orders, and then returns to normal values, the trader’s position on the derivative contracts will not be liquidated.
Open positions in Xena Listed Perpetuals are subject to regular clearing. The clearing for all perpetuals occurs every hour on the hour.
During the clearing, the variation margin is calculated as the difference of the current value of the position, calculated based on the underlying index, and its value at the moment of the last clearing (or at position opening, if the position was opened after the last clearing). Depending on the result, the calculated variation margin is added (if positive) or subtracted (if negative) from the balance of the account. After the clearing, you can use the income settled in your account right away without limitations, withdrawing it or using it as a margin in new positions.
The interest payments are calculated based on the value of the position as of the last clearing, and the interest rates are defined by the interest rate indices defined in the contract specifications.
Start of Trading
Xena Listed Perpetuals will soon be launched for basic cryptocurrencies and indices. In the first stage, contracts will be launched for BTC to USD (February 18) and for GRAM to USD (February 27), and then synthetic contracts for the BTC volatility index and the BTC difficulty index will be launched.
The GRAM contract to USD will appear on the exchange on February 28 and will be the first derivative contact of the Telegram TON token. The GRAM contracts will provide everyone who wanted to but did not manage to buy GRAM during the token sale the chance to earn money on the potential appreciation of the popular token, and current holders of GRAM will be able to protect their investments from a possible fall after the token is listed on the digital asset exchanges.
“This is a significant step forward for the entire cryptocurrency market. The GRAM token is important to the community and therefore has significant potential in the form of a derivative contract. This is the first case in the cryptocurrency market where synthetic contracts are used not only for speculative operations for profit but also to hedge risks.”
Anton Kravchenko,
CEO Xena Exchange
“Providing unique and useful derivative contracts and customer protection is one of our main principles at Xena Exchange. We know well the realities of the modern cryptocurrency market – and we know what tools the user needs, so the focus is now on cryptocurrency-settled derivative contracts.”
Alexey Semichastnov,
Chief Product Owner Xena Exchange
Spot trading on the Xena Exchange is already available. Open an account right now, test the capabilities of the platform, and get ready for the launch of the first crypto-settled derivative contracts!
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The original story was published on the official Xena Exchange blog
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Nothing written above should be taken as an express or implied promise or guarantee. Trading in cryptocurrencies involves significant risks. Investments may fall or rise unexpectedly. Past performance is not a reliable indicator of future results. You may suffer considerable losses and potentially lose more than you have invested.
