Understanding the different prices in Deri Protocol’s derivatives trading
Deri Protocol is a leading decentralized platform for trading derivatives such as Perpetual Futures, Everlasting Options, and Power Perpetuals for BTC, ETH, and other top cryptocurrencies.
All trades on Deri Protocol are executed under DPMM (Deri Proactive Market Making). This is why you have come across three different prices when trading on Deri Pro/Lite: Index Price, Mark Price and Entry Price.
What’s Index Price?
Index price is spot price of the underlying asset.
What’s Mark Price?
Mark Price, on the other hand, is the price of the market, given by Deri Proactive Market Making (DPMM). This is the trading price of a trade with an infinitely small trading volume (i.e. without slippage) at the current moment.
With Deri’s PMM algorithm, when the net position is 0 (the equilibrium state; long positions equals short position), the mark price equals the index price fed by the oracle. Whenever there is a trade, it pushes the mark price toward the specific trading direction (i.e. a buying trade pushes the price up while a selling pushes it down). The price change due to the trade is proportional to the trade size.
If you would like to further understand the technicalities of Mark Price, please refer to doc center: https://docs.deri.io/
What’s Entry Price?
Entry Price is the average price for establishing the current position. If the position is established with multiple trades, then this equals the total cost of all the trades divided by the position volume.
Entry Price is used as the reference to calculate unrealised PnL as it may be difficult to know the actual realized profit before closing off a position.
About Deri Protocol
Deri, your option, your future!
Deri is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. With Deri Protocol, trades are executed under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects. Having provided an on-chain mechanism to exchange risk exposures precisely and capital-efficiently, Deri Protocol has minted one of the most important blocks of the DeFi infrastructure.
