Futures Trading Glossary

This section aims to provide a glossary to explain all the commonly used terms in Futures trading.

Basis: The differential between the current price of the cryptocurrency and its nearby futures
price.

Base currency/Settlement currency: This is the currency in which the P&L of a Futures position is calculated. In our example, the base currency is the same as the quote currency, i.e. LTC. However, this need not always be true.

Closing Price: The fair value price trading near the end of the trading session.

Contract Size (m): The amount or quantity of the commodity or crypto represented by
each Futures contract.

Contract Value: The current price of the Futures contract multiplied by the contract size.

Derivative: A derivative is a financial contract with a value that is derived from an underlying asset. 

Derivatives have no direct value in and of themselves; in other words, their value is based on the expected price movements of their underlying asset. When the underlying asset is a crypto like Bitcoin, they are termed as Crypto derivatives. 

Trading Crypto derivatives doesn’t actually mean buying or selling cryptos. It provides an alternative path to get exposure to the underlying crypto. 

Derivatives are often used as an instrument to manage financial risk at the expense of high returns for the other party. 

Last Price: It is the price at which the last trade has occurred right before the time of contract expiration. Last Price Marking ensures that the contract is settled closest to the spot market price. It minimizes the price discrepancy and ensures a fairer trading environment.

On CoinDCX’s platform, the liquidation of the contract is executed based on the last price. This choice brings more flexibility and power in the hands of the traders to adapt based on their risk tolerance and market conditions.

Locked Margin (L%): Locked Margin is the amount which you will lock in the exchange to open a leveraged position and keep trading position open. If the losses on your positions increase more than the Locked Margin, the exchange will liquidate your positions to recover the losses.

Long Position: A buyer of futures contracts. A long position is the number of purchase contracts held by the buyer.

P&L: P&L stands for profit and loss. When you have open positions on a Futures market and it is susceptible to change based on market conditions, we call the P&L is unrealized. When you close your positions, the unrealized P&L becomes realized P&L (either partially or entirely).

Quote currency: This is the currency in which the price of the underlying is quoted. In our example, the price of LTC is quoted in BTC terms. Hence, quote currency is BTC.

Short Position: A seller of futures contracts. A short position is the number of sales contracts held by the seller.Underlying Currency: This is the crypto over which a Futures contract is defined. In our example, the underlying is LTC.