Perpetual futures are the most widely traded derivative instrument in crypto markets. Unlike traditional futures contracts, they carry no expiry date — you can hold a position indefinitely, provided your margin balance remains sufficient. The mechanism that keeps perpetual prices tethered to the underlying spot market is the funding rate.
This article explains how perpetual contracts work on LMEX: mark price, funding fees, leverage, settlement, and the liquidation system.
What Is a Perpetual Contract?
A perpetual futures contract is an agreement to buy or sell an asset at a specified price, with no settlement date. You profit if the price moves in your favour and lose if it moves against you, with gains and losses amplified by the leverage you apply.
LMEX’s perpetuals track a wide range of assets — from major tokens like BTC and ETH to a growing list of altcoin markets visible at lmex.io/en/futures. You do not take delivery of the underlying asset. Settlement is handled in your chosen currency at position close. See the full contract specifications guide for per-contract details.
Three Prices You Need to Understand
Market Price: The most recent trade price on the LMEX order book — what you see on the chart.
Index Price: An independently calculated reference price derived from multiple external spot exchanges. On LMEX, the index is the weighted average spot liquidity mid-price from five reference feeds — Woo, Gate.io, Binance, OKX, and Bybit — with the highest and lowest values removed before averaging. This makes it manipulation-resistant across any single venue.
Mark Price: The price used for all unrealised PnL calculations and all liquidation determinations. For LMEX perpetuals:
Mark Price = (Spot Liquidity Mid Price × 75%) + (LMEX Impact Mid Price × 25%)
This blend anchors the mark price to the external index while incorporating real LMEX order book depth. It reduces the risk of liquidations caused by temporary wicks or momentary thin order books on LMEX alone.
Leverage and Margin
Leverage amplifies both gains and losses. At 10x, a 1% move produces a 10% gain or loss on your margin. At 100x, that same 1% becomes a 100% swing.
LMEX offers up to 100x leverage on BTC and ETH perpetuals. Other contracts carry lower maximums depending on their liquidity profile. Two margin types govern every position:
- Initial margin: The minimum required to open a position. At 100x on BTC, this is 1% of the notional value.
- Maintenance margin: The minimum to keep the position open — 0.5% for BTC. When your margin balance reaches this threshold, liquidation is triggered.
Funding Rates
Funding rates prevent perpetuals from drifting away from their underlying index. Every 8 hours, a payment is exchanged between long and short holders:
- When the perpetual trades at a premium to the index (bullish crowding), longs pay shorts.
- When it trades at a discount (bearish crowding), shorts pay longs.
You only pay or receive funding if you hold a position at the exact funding interval. The formula is:
Funding Fee = Notional Value × Funding Rate
Funding rates are dynamic and displayed live on the trading interface. Over extended holding periods — particularly in strongly directional markets — cumulative funding costs or income can be material.
Settlement Currencies
When you close a position, profits and losses are settled in your chosen currency. LMEX supports the following settlement options across its perpetual contracts:
Crypto: USD, USDT, USDC, BTC, ETH, SOL, XRP
Fiat: AED, AUD, CAD, CHF, EUR, GBP, HKD, INR, JPY, MYR, NZD, SGD
Settlement currency availability may vary slightly by contract. Settling in a volatile asset rather than a stablecoin results in a slightly smaller unit amount, as a haircut is applied at settlement to reflect the asset’s price risk.
Liquidation and Partial Liquidation
When the mark price crosses your liquidation price, LMEX’s liquidation engine takes over. The system first attempts partial liquidation — closing only the portion of the position needed to bring margin back above the maintenance threshold, preserving as much of your position as the maths allow.
Full liquidation proceeds only when partial liquidation is insufficient. If the system cannot close the position at the bankruptcy price, it draws on the insurance fund. If the insurance fund is insufficient, auto-deleveraging (ADL) begins — the liquidated position is matched against opposite positions ranked by profitability and leverage.
A full walkthrough of liquidation mechanics is in the liquidation guide.
One-Way Mode and Hedge Mode
LMEX supports two position modes. One-Way Mode limits you to one direction per market at a time — simpler to manage for directional traders. Hedge Mode allows simultaneous long and short positions in the same market, useful for locking in unrealised PnL or running concurrent strategies. Full details are in the position mode guide.
Frequently Asked Questions
Can I hold a perpetual contract indefinitely? Yes, as long as your margin balance stays above the maintenance margin requirement and you can cover funding costs.
How do I find my liquidation price? LMEX displays an approximate liquidation price on the trading interface when you have an open position. The calculation methodology is explained in the liquidation guide.
What is partial liquidation? The closure of only part of your position — the minimum needed to restore your margin above the maintenance threshold. It is the system’s first response and produces a better outcome than full forced liquidation.
Is funding charged if I hold a perfectly hedged position? Yes. In Hedge Mode, funding applies to each leg independently. Depending on the funding rate direction, you will pay on one side and receive on the other — these do not necessarily cancel out perfectly.
What happens if the insurance fund is depleted? Auto-deleveraging (ADL) activates, systematically reducing opposite positions ranked by profitability and leverage until the liquidated position is closed.
