Perpetual markets

A perpetual contract lets traders take a long or short view on a price without owning the underlying asset and without choosing an expiry date.

A trader who expects the price to rise can open a long position. A trader who expects it to fall can open a short position. When the position is reduced or closed, the difference between its entry and exit prices becomes realized profit or loss.

The contract behind a market

Each Novrinex market has a contract specification that gives every participant the same terms. It identifies the underlying asset or index, defines what one contract represents, and names the asset used to settle collateral, fees, funding, and profit or loss.

The specification also sets the market’s precision. Tick size is the smallest valid price change, while lot size is the smallest valid quantity. A market with a 0.10 tick accepts 100.20 and 100.30, but rejects 100.25.

Risk terms belong to the same specification. Initial margin controls how much collateral is required to open exposure. Maintenance margin defines when an existing position becomes eligible for liquidation. Position and open-interest limits bound the exposure of one account and the market as a whole.

How traders meet

Each market has an order book containing bids to buy and offers to sell. A limit order can wait at a chosen price, adding liquidity for someone else. An order that accepts an available price removes that liquidity and trades immediately.

The resulting fill has two sides, but settlement is one operation. Novrinex updates both positions, realizes any closed profit or loss, charges fees, and recalculates collateral together.

Long and short positions

A positive position quantity is long and a negative quantity is short. Trading further in the same direction increases the position and updates its average entry price.

Trading in the opposite direction first reduces the position. If the trade is larger than the existing quantity, it closes the old position and opens the remainder in the opposite direction at the fill price.

Unrealized profit or loss changes with the mark price while the position remains open. It becomes realized when quantity is closed.

Settlement asset

Every market names one settlement asset. The trader deposits this asset as collateral, and the clearinghouse uses it for fees, funding, realized profit or loss, insurance, and liquidation accounting.

A profitable trader receives value from an explicit market account or counterparty movement. A losing trader sends value through the corresponding ledger entry. Normal trading does not create settlement assets.

Why perpetual prices follow the underlying market

Because the contract never expires, its market price does not periodically converge through delivery. Funding provides the economic link instead.

At regular intervals, one side of the market pays the other according to the difference between the perpetual price and its index. A contract trading above the index generally produces payments from longs to shorts; one trading below generally produces payments from shorts to longs.

The index represents the underlying market. The mark price is used for margin and liquidation so that account health does not depend on one isolated fill. The oracle prices guide explains how these values are kept separate.

Market states

An active market accepts orders that can create exposure. A paused market blocks new risk but keeps cancellations and solvency actions available. A settled market closes positions at its settlement price and no longer trades.

Changes to a contract specification take effect through versioned parameters at an agreed network height. All traders, applications, and validators therefore apply the same terms to a given transaction.