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Index Perpetual Futures Trading

https://app.yieldification.com/perpetual
YDF Index Perpetual Futures & Examples

How it Works?

YDF futures allows you to trade against a few single large cap assets & a set of weighted indexes made up of anywhere from 2-6 assets where the price is a weighted average (see Example Indexes). You can choose to predict the future price of the asset(s) by putting collateral and going with (long) or against (short) the price of the index. This action opens a future's position using the collateral of your choice (default YDF) that we support. When you close the position, the platform calculates your PnL and returns back to you your original collateral +/- any profit/loss and fees at closing time.

Example Indexes

The following shows how arbitrary weightings provided and assets that make up an index end up pricing the index. We will calibrate the "multipliers" periodically for any indexes in the platform to ensure the current multpliers result in the appropriate and desired weightings in the index, as over time and as prices change if the multipliers don't, single asset price movements could move the index price more or less than originally desired.

L1 Index

Asset
Weight (%)
Price
Multiplier (weight / price)
Bitcoin (BTC)
600 (45.2%)
$20,000
0.03
Ethereum (ETH)
500 (37.7%)
$1,500
0.333
Binance Coin (BNB)
150 (11.3%)
$300
0.5
Solana (SOL)
75 (5.8%)
$30
2.5
Index
$1,325**
  • ** Index price: $1,325 - (20,000 * 0.03) + (1,500 * 0.33) + (300 * 0.5) + (30 * 2.5)

Leverage

Leverage can be enabled to support higher R/R trading for those who desire it. Using leverage when trading provides a means to effectively borrow additional assets to trade above and beyond your collateral temporarily allowing for the upside to potentially be substantial. That being said, the opposite also holds true whereas the risk of liquidation also increases at the same time.
  • Min leverage: 1x
  • Max leverage: 50x
Using leverage can be risky and the probability of liquidation increases substantially with the amount of leverage being used. Before using leverage please understand the risks and realize you are using our platform and leverage at your own risk.

Fees

All fees will be charged in YDF out of the collateral put up on open and out of the final collateral+profit distributed at close and can be adjusted as needed to ensure they align with what the market will bear.

Open Position

  • 0.15% of the position size

Close Position

  • 0.15% of the position size
  • 0.005% / hour that the position was opened

Example: Full Position Lifecycle

Jane opens long position w/ 1000 YDF collateral against the L1 index at 5x leverage (i.e. 5000 YDF position size pre fees).
  • Jane's position size before any fees is 5000 YDF. On open, she is charged 0.1% position size, which is 5 YDF total open fees, so her final collateral and position size after opening is 995 YDF (1000 - 5 YDF open fee) & 4975 YDF (995 * 5x leverage) respectively.
  • After 12 hours, the L1 index has risen 20% and Jane would like to close her position. She is currently sitting in profit of 995 YDF (4975 * 20%).
  • Her closing fees are calculated as 0.1% position size, 4.975 YDF (4975 * 0.1%), and 2.985 YDF (4975 * 0.005% * 12 hours). 4.975 YDF + 2.985 YDF = 7.96 YDF total closing fees
  • Total returned to Jane on close is 1982.04 YDF (995 YDF principal + 995 YDF profit - 7.96 YDF closing fees).

Collateral: Trading w/ Tokens Other than YDF

How it works

Most decentralized web3 futures platforms support trading with collateral consisting of the actual assets they're trading against (i.e. BTC, ETH, etc.) or a select few highly liquid top 10-20 alts/stable coins. There are a number of benefits supporting this method of offering futures trades, although it limits anyone who would like to open a trade on the platform but has a substantial amount of their capital tied up in unsupported assets.
Through a due diligence process at first and DAO governance in the future we are going to support trading on the YDF platform with other collateral besides YDF itself. Some assets will be obvious such as alts (USDC/USDT) and wrapped large caps (WBTC, WETH), but we will support additional collateralized trades through smaller but still very liquid alts such as LINK, SHIB, and others will be considered.

Accounting for Fees

  • Open Fees: Taken out of the original collateral when opening the position.
  • Close Fees: If the position is in loss, closing fees will be taken out of the remaining collateral we return back to you. If the position is in profit, we return all of your collateral minus the open fee above, then fees will be removed from the final amount of YDF we deliver that makes up your final profit.
When trading with collateral other than YDF, we calculate the final amount of YDF to deliver with a 6% spread based on the price of both the collateral asset and YDF, meaning if you have a position that was in 10% profit from the original collateral, you will receive ~9.4% of that exact value of YDF (minus closing fees).

How is Profit Paid?

Profits from all trades will be paid out in YDF regardless of the collateral used to trade. We have created a reliable, safe, and secure off-chain automation process that will monitor the collateral asset and YDF price in a TWAP-like manner to ensure payouts are paid in the appropriate ratio based on profits made from a closed profitable position.
When a profitable position using non-YDF collateral is closed, it could take up to 10-20 minutes for the YDF provided as profit to be delivered to your wallet. We have built an automation process that does price evaluations through oracle and TWAP methods to ensure safety and security of the protocol when converting between collateral & YDF prices to determine how much profit should be provided to users.

Why Allow Other Assets as Collateral?

Allowing traders to use assets besides YDF to trade with allows a number of benefits for the protocol and traders:
  1. 1.
    Traders don't need to liquidate any tokens from supported collateral before trading. They can freely trade them without any extra steps.
  2. 2.
    YDF will be able to collaborate with other strong projects and their respective communities for marketing opportunities among other things.
  3. 3.
    YDF will be able to add strong alts to it's treasury to be used to continue sustaining YDF staking yield, DAO incentives, and other day-to-day operational costs.

Counter Party

The YDF protocol currently serves as the counter party for all trades, and all profits are paid out in YDF regardless of the asset/index being traded against or the asset being used as collateral. This is a unique method of supporting the platform and functionality and has it's own set of both benefits (i.e. collateral collected from any losing trades goes directly to the protocol) and challenges (i.e. the protocol assumes the risk and pays out YDF for profitable trades). We believe the benefits outweigh the challenges and will support the platform and protocol long term. We will make adjustments to both max open interest allowed per collateral supported as needed to ensure the health of the platform long term.

Maximum Collateral Long/Short Spread

As a method to control the downside risk of being the counter party to futures traders, we implement caps on the amount of each collateral asset that can be traded with given the open interest against that collateral. If there is a fairly even split between long and short interest for a position, users can open positions with more collateral, but as long or short interest grows more lopsided, positions will reach a cap where users will need to wait for positions to close before they can open new trades.

Trigger Orders (Take Profit/Stop Loss)

Make sure you fully understand your position lifecycle (see Take Profit Requirements section), your take profit configuration, and how these overlap. If you configure a take profit order and are within the index price requirement and minimum time frame for an order to take profit within this threshold, your position will still be closed at the time the order is triggered and you will not receive profit.
You can create take profit or stop loss orders in YDF on any opened position. Just like a position that gets into liquidation status normally, Chainlink Keepers is also used to monitor the index price against any configured trigger orders and will close positions that reach those thresholds.
  • Take Profit: closes a position when a position in profit reaches a configured amount of profit.
  • Stop Loss: closes a position when a position in loss reaches a configured amount of loss before it hits a liquidation price.

Liquidation

Liquidation occurs when a position has very little (or no) collateral left based on the size of the position and leverage used or fees surpass any collateral left if the position is left open for too long.

Calculating Liquidation Price

The exact liquidation price movement required to liquidate a position can be calculated by taking the price of the asset the position is open against, and dividing that price by the leverage used.
At Yieldification we will liquidate a position when the price gets 90% to the liquidation price (i.e. this price below the asset price if it's a long position, or above if it's a short position), leaving 10% wiggle room to accommodate paying fees and any latency/delays with Chainlink Keepers and on chain mining to execute liquidation.
pfYDFLiquidationMovement = indexPrice * 90% / leverage
pfYDFLiquidationForLongPosition = indexPrice - pfYDFLiquidationMovement
pfYDFLiquidationForShortPosition =indexPrice + pfYDFLiquidationMovement

Toolset Used

When an open position gets delinquent meaning the position standing and/or any accrued fees exceeds the amount of collateral available for the position, it should be closed and liquidated.
We have positioned ourselves to utilize Chainlink Keepers, an automation service that handles checking and executing conditional logic off and on chain using the most secure decentralized oracle network to exist, to handle liquidation of positions requiring it.
Using Chainlink Keepers allows us to focus on the cure features and business logic that will keep the project moving onwards and upwards in terms of providing value to the market as opposed to the mundane tasks that are required to maintain backend infrastructure and logic. We are pleased to partner with Chainlink to support our products and services and will work closely with them on future features and functionality where they can continue to provide value to YDF.

Take Profit Requirements

YDF futures index prices are aggregated and calculated at any moment in time using Chainlink Price Feeds. Therefore we are bound to the restrictions and limitations that exist with using them. As the data is not streaming through Chainlink and populated on chain, price movements occur based on bounds of threshold movement or heartbeat intervals. More information can be found in Chainlink's documentation.
Because of the minimum heartbeat limitations for most feeds, we implement the following restrictions for taking profit early in a position lifecycle to prevent bots from exploiting the system. We will continuously seek improvements and potentially explore migrating futures to a chain where these limitations are significantly less prominent once the merge is complete, but for now they are in place for the safety of the platform.
A position can be closed at any time regardless of the profit/loss standing of the position, but if in profit it will not be realized unless/until one the following restrictions has been met (only one needs to be met to realize profit):
Arbitrum Network
  1. 1.
    The asset/index price has moved >= 2.5%
  2. 2.
    The position has been opened for >= 6 hour
Ethereum Network
  1. 1.
    The asset/index price has moved >= 3%
  2. 2.
    The position has been opened for >= 12 hours