Both Perpetual Futures and Everlasting Options are funding fee based. Funding fees are periodic payments between traders and or liquidity providers (i.e paid peer-to-peer). Hence, Deri Protocol takes no fees from funding fees as it is done directly between users. Depending on the derivative type, the direction and the total net position: traders and or liquidity providers will either pay or receive funding fees.
To balance the two sides of long and short positions, the pool will always apply a funding fee to the majority side. The funding fee mechanism of Deri Perpetual Futures is quite similar to that of the centralized exchanges (e.g. BitMEX). That is, the funding fee is proportional to the spread of the mark price over the index price, i.e. (mark-index). Every second, one long position pays one short position funding fee as below:
where P is the mark price, i is the index price, and f is the funding fee coefficient.
is determined by the net position, the funding fee is ultimately determined by the net position. Specifically, when
, the funding fee is positive (meaning long positions pay short positions), whereas when
, the funding fee is negative (short positions pay long positions).
This is mathematically equivalent to our funding mechanism prior to V2.1 (V1 and V2). Please refer to this article for the comparison and equivalence between the funding mechanisms of V2 and V2.1.
For each second, assuming the total number of contracts in a long position is L while that in a short position is S. Then every single long contract will pay a funding fee per the following formula:
Please note: 1. the Funding Fee is accrued on a per-second basis. That is, a funding fee of (Funding Fee for 7 Day)/604800 is accrued every second.
2. Unlike Perpetual Futures, theoretically the funding fee for Everlasting Options is always positive (i.e. long positions always pay Funding Fee to short positions).
While in theory the Funding Fee for Everlasting Options is always positive, it can be pushed to negative by trading actions in real trading.