When trading cryptocurrency derivatives on an exchange, index price, mark price, and last price are fundamental concepts that influence trading decisions. Let's explore what these terms mean and how they impact futures trading.

Last Price

The last price refers to the price at which the most recent futures trade was executed. This price is updated in real-time. While mark price is used to calculate unrealized PnL, last price determines realized PnL.

For example, in the BTCUSDT perpetual futures market, the futures price is influenced by Bitcoin's spot price. However, since traders actively buy and sell BTCUSDT futures on TruBit Pro, supply and demand can create a futures price that differs from Bitcoin's spot price.

In other words, the last price of a futures contract may gradually diverge from the underlying asset's spot price. As trading volume in the futures market increases, this price gap can widen. To ensure stable and reliable pricing, TruBit Pro relies on mark price instead of last price for key calculations.

Mark Price

The mark price is a critical factor of derivatives trading, used to trigger liquidations, calculate leverage, and assess unrealized profit and loss (PnL). It helps ensure fair liquidation prices and prevents price manipulation.

Key points:

• Mark price is used to calculate unrealized PnL but does not directly affect actual PnL.

   

• A position will only be liquidated if the mark price reaches the liquidation price.

Mark price is typically derived from the midpoint of the order book price but is also linked to the index price (discussed below) to ensure fairness and prevent excessive deviations from the spot price. This means that the mark price is influenced by the spot prices of major exchanges. The mark price is calculated differently for various derivatives. To keep this guide simple, we will only discuss the core concept of mark price without diving into the complex formulas.

In addition to the index price, the mark price takes into account another factor: the moving average benchmark. This benchmark continuously updates a token's average price over a set period, helping smooth out price fluctuations during high volatility and preventing unnecessary liquidations.

It is essential to emphasize that mark price plays a key role in calculating leverage, assessing PnL, and triggering liquidations.

Index Price

The index price represents the weighted average of a token's spot price across multiple major exchanges (e.g. Binance, Okex, Huobi, Coinbase, Kraken). Since prices can vary across different exchanges, the index price calculation depends on which platforms are considered "major exchanges." Only data from these selected exchanges is included in the index price calculation.

How is index price calculated:

Index price = (spot price on exchange A × weight A) + (spot price on exchange B × weight B) +…

A higher trading volume results in a higher weight in the index calculation. This means that the more trading volume an exchange has, the greater its influence on the index price.

The index price ensures fair and accurate pricing for derivatives trading, including futures, perpetual futures, and funding rates. Its purpose is to ensure that derivatives futures are settled at a fair price. TruBit Pro is dedicated to offering users top-tier products with fair and accurate pricing. TruBit Pro's index prices are sourced from multiple leading centralized exchanges.

You can check the index price sources for specific trading pairs at the bottom of the Contract Information > Price index page on TruBit Pro, as shown in the image below.

Conclusion

Understanding index price, mark price, and last price is essential for futures traders. These pricing mechanisms not only help traders make better decisions but also play a vital role in margin calculations and liquidation processes.

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If you have questions regarding this information, please contact the TruBit Team via our chat channel or email us Here and we'll be in touch!