This article explains the concept, role, and calculation of Mark Price in Futures Trading.
🔍 What Is Mark Price?
Mark Price is used to estimate the fair value of a contract, rather than relying only on the actual traded price (Last Price).
🛡 Why Mark Price Is Used
Mark Price is designed to help prevent:
⚠️ Unfair liquidations
⚠️ Liquidations caused by temporary price spikes during high market volatility
📊 Relationship with Index Price
📌 Index Price
→ Based on prices from the spot (underlying) market
📌 Mark Price
→ Represents the fair value of a perpetual futures contract
⚙ How Mark Price Is Calculated
Mark Price is typically calculated based on:
📌 Index Price
📌 Funding-related data (such as funding rate)
💰 Relationship with Unrealized PnL
Mark Price is an important factor used in calculating Unrealized PnL.
💡 Summary
✅ Mark Price represents the fair value of a contract
✅ Helps prevent unnecessary liquidations
✅ Used to calculate Unrealized PnL and liquidation price"
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