Mark Price
The mark price is a reference price used by many derivatives exchanges to calculate unrealised PnL and determine liquidation risk.
✦ Key Insight
The mark price helps reduce unnecessary liquidations caused by temporary spikes or manipulation in an exchange’s last traded price. It is especially important for leveraged traders because liquidation may be based on the mark price rather than the most recent trade.
✕ Common Misconceptions
Watching only the last price
Assuming liquidation happens exactly when chart price touches the liquidation level
Ignoring exchange methodology
Confusing mark price with index price
Using excessive leverage near liquidation
Detailed Explanation
How It Works
An exchange may calculate mark price using:
An external spot index
A funding basis
Several reference exchanges
A smoothing formula
The exact method differs by platform.
The mark price is compared with a trader’s entry price to estimate unrealised profit or loss. It may also be used to determine whether margin has fallen below the maintenance requirement.
FAQs
Is mark price the price I trade at?
Not necessarily.
Why does my PnL differ from the chart?
Your exchange may calculate PnL using mark price.
Is mark price the same everywhere?
No. Each platform may use a different methodology.
In Practice
Dig Deeper
Perpetual Futures
Perpetual Futures (Perps) Perpetual futures, often called perpetuals or perps, are derivative contracts that track the price of an underlying crypto asset without having a fixed expiry date.
Margin
Margin is the amount of capital a trader must deposit to open and maintain a leveraged position.