Introduction to okex and inverse futures
Okex.com has the most liquid bitcoin futures market. Before you start trading there, it is vital that you understand the mechanics of this platform’s futures contracts. What you trade at okex is not your vanilla direct futures, it is, what is called, an inverse futures contracts.
To get the basic understanding of how inverse futures work, please read up on this article: What is an inverse bitcoin futures contract?
Now that you have some grasp of the inverse futures market concept (hopefully) let’s see what’s happening behind the curtain when you submit your long and short orders on okex.
Pricing $100.00 futures contracts in bitcoins
What you are trading at okex.com is the batches of $100 (one contract size) priced in BTC, just like one would trade in conventional futures market batches of wheat bushels versus USD on Chicago Mercantile Exchange. In other words, when you enter into a contract on okex.com, you agree to buy or sell a $100 for BTC on a future date (contract expiry date). The actual bushels, or batches of $100, do not need to be delivered when the contract expires, and profit/loss difference is settled in cash between contract parties (USD in case of wheat and BTC in case of $100 contracts on okex).
However, since most traders are used to see price quotations as BTC/USD, and not the other way around (because if you trade batch of $100 vs BTC, the pair would be USD/BTC, bitcoins per one batch) – okex.com contracts, therefore, are inverse! Meaning the calculations of your profit/loss in the pair USD/BTC are inverted, so that it looks like a regular BTC/USD pair, by adding an opposite (negative in this case) sign the profit/loss formula (explained in detail in the link mentioned earlier).
You also see price quotations as USD per one BTC, for example, $7,600 per BTC at the time of writing this article. But remember, since you trade $100 vs BTC, under the hood, your entry/exit price is converted to BTC per $100, in other words how much bitcoin do you pay for one hundred dollar bill.
Okex futures example
Let’s take a look at an example with one contract for simplicity (fees are neglected).
You send a limit sell order for one contract ($100 worth) at $7,500, and another okex trader fills it, thus creating one contract. What just happened, is that you longed that $100 batch priced in bitcoins just like in any other futures market. Since one BTC is $7,500, it is worth 75 contracts ($7,500/$100 = 75 contracts per BTC), and since you trade BTC per contract, one contract would be worth one 75th of BTC, so your entry price is 0.013 BTC (1/75 = 0.013).
So we now have decomposed our inverse futures contract to a direct futures contract. You agree to buy $100 priced in BTC at the 0.013 BTC on a contract expiry date. If the BTC price goes down, to $7,000 let’s say, that would mean that your $100 is now worth more in terms of BTC, to be exact it’s 0.014 (1/70 = ~0.014), and your profit would be 0.014 – 0.013 = ~0.001 BTC. When you close your position or contract expires, your account gets credited with 0.001 BTC.
In essence, okex.com inverse bitcoin futures provide the ability to trade BTC vs USD without ever depositing fiat money. Each contract is worth $100.00 in terms of BTC. When okex traders open long or short position, they are betting on how much $100.00 will be worth in terms of bitcoins in the future. The winning side then receives the difference in price of $100.00 in terms of BTC from the entry, and the losing party pays.