📖What is Mark Price, Oracle Price, Index Price, and Last Price?

In the past few years, crypto derivatives have gained significant popularity among traders who want to participate in the digital asset market without actually owning them. Nevertheless, getting a hold of the basic concepts behind crypto derivatives may be daunting, especially for beginners. Mark Price, Oracle Price, Index Price, and Last Price are three essential elements that every crypto trader should know in crypto derivatives trading.

What is Mark Price?

The mark price is a benchmark for the value of the underlying cryptocurrency. It’s used to calculate the unrealized profit and loss of a trade, as well as the position margin, providing traders with a more accurate picture of the potential profitability of a trade. The calculation of Mark Price takes into consideration the average of the last traded price, the best buy price, and the best sell price. This calculation method helps ensure that the price of the contract accurately reflects the underlying asset's value.

Mark Price is used as a standard reference point for marking-to-market contracts. On a daily basis, futures contracts are settled based on the difference between the Mark Price and the contract price on the previous day. This process helps to protect investors from price discrepancies that can occur during trading hours.

What is Oracle Price?

The Oracle Price is the latest oracle mark price introduced by Chainlink. This price is used for maintenance margin and liquidation calculation. This essential market data plays a crucial role in determining the financial stability of leveraged positions. It serves as a key input for risk management systems, enabling accurate evaluation of portfolio exposure and potential liquidation scenarios.

What is Index Price?

The Index Price is the average price of the assets that make up an index, such as a stock market index like the S&P 500. The Index Price is calculated by taking a weighted average price of all the assets in the index. This calculation method ensures that highly valued assets have a greater impact on the Index Price than assets with lower values.

The Index Price is used as a benchmark to track the performance of an index. This can help investors to gain insight into the overall health of the market or a particular sector. For example, if the Index Price of a stock market index is rising, investors can interpret this as a sign of the market's strength.

JOJO's Index Price is introduced from Binance, and it will move with the Binance Index Price.

What is Last Price?

The Last Price is the price at which the last trade was executed for a particular asset or security. It is typically the closing price for the day. The Last Price can provide a snapshot of how an asset or security is performing in real-time. Investors can use this information to make informed decisions about buying or selling an asset.

The Last Price can also be used to calculate an asset's performance over a period of time. By comparing the Last Price to the opening price or the price at which the asset was purchased or sold, investors can determine the gain or loss on their investment. For example, if the Last Price of a stock is higher than the purchase price, the investor has likely made a profit.

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