Overview

A Yield Swap is an innovative product invented by BitMEX. The Yield Swap Contract is similar to a traditional Interest Rate Swap:

• There is a fixed expiry date (subject to the Early Settlement).
• Yield Swap Contracts are not tied to their underlying index in the same way as Perpetual Swaps and so may trade a siginificantly different price to the underlying index.
• Each yield swap contract has its own details which can be found in its Contract Specifications. These details include:
  • Expiry Date
  • Currency
  • Reference Index
  • Funding Rate
  • Maximum Leverage

Leverage

Yield Swap contracts do not require traders to post 100% of collateral as margin, because of this you can trade with leverage of up to 2x on BitMEX’s Yield Swap contracts and. Margin on BitMEX is denominated in Bitcoin and other cryptocurrencies, allowing traders to speculate on the future value of its products using only Bitcoin or other cryptocurrencies.

Payout

Traders can make or lose money when trading Yield Swaps through two mechanisms, PnL Realisation and Floating Funding payments.

List Of Contracts

You can view the full list of yield swap contracts currently available for trading on the BitMEX Contract List.

Mechanics of Yield Swap Markets

When trading yield swap contracts, a trader needs to be aware of several mechanics of the market. The key components a trader needs to be aware of are:

1. Multiplier: How much is one contract worth? You can see this information under the Contract Specifications for each instrument.
2. Position Marking: Yield contracts are marked using LastPriceAdjusted method. The mark price determines Unrealised PNL and liquidations.
3. Initial and Maintenance Margin: These key margin levels determine how much leverage one can trade with and at what point liquidation occurs.
4. Floating Funding: Any position in a yield swap that is open when Floating Funding occurs (every 24 hours) will pay or receive Floating funding, net settled against the Average Entry Price of their position.
5. Settlement: How and when the yield swap contract expires, or settles, is important for traders to understand. BitMEX yield swaps have a larger Contract Size with more time to expiry. This expiry date may vary from instrument to instrument and traders should read the individual contract specifications to see when the expiry is and the individual settlement procedure.
6. Basis: The basis refers to what premium or discount the yield swap contract trades at when compared to the underlying Reference Index. Basis exists because yield swap contracts expire in the future and the price is made of the market’s expected values of all the future Floating Funding payments and Settlement.

Traders can observe the current and historical funding rate for a contract by looking at the corresponding Floating Funding Index.

Position Size and Price Marking

The Position Value for Yield Swap contracts depends on the number of days remaining on the swap as well as the Average Entry Price.

The Position Value is defined as:

Position Value = Number of contracts * Multiplier * Average Entry Price * days until expiry / 365

The Mark Value of the position is defined as:

Mark Value = Number of contracts * Multiplier * Mark Price * days until expiry / 365

The Unrealised PnL of a position is defined as:

Unrealised PnL = Mark Value - Position Value
               = Number of contracts  * Multiplier * (Mark Price - Average Entry Pice) * days until expiry / 365

When closing a position, the Pnl that is realised depends on the number of days remaining on the swap as well as on the Average Entry Price and Exit Price:

PnL  = Position Exit Value - Position Entry Value
     = Number of contracts * (Exit Price - Average Entry Price) * days until expiry / 365

Consider these examples:

With 50 days until expiry Grace is long 20 contracts of ETHYLDZ22 at 4.00% She close out her position at 5.00% and realises her PnL as:

PnL = 20 x (5.00% - 4.00%) x 50/365 = 0.02740 ETH

With 40 days until expiry Kevin is short 20 contracts of ETHYLZ22 at 5.00% He closes out his position at 6.00% and realises his PnL as:

PnL = -20 x (6.00% - 5.00%) x 40/365 = -0.02192 ETH

Floating Funding

Floating Funding occurs every 24 hours at 12:00 UTC . You will only pay or receive Floating funding if you hold a position at this time. If you close your position prior to the funding exchange then you will not pay or receive funding.

Each day traders with open positions will make or receive net funding payments .

• Traders who are long will pay a fixed rate (their average entry price) and will receive the Floating Funding Rate.
• Traders who are short will receive a fixed rate (their average entry price) and will pay the Floating Funding Rate.
• These annualised rates are applied to the 1 day floating funding period using a day fraction of 1/365.

Floating Funding Received = Number of Contracts * Multiplier * (Floating Funding Rate - Average Entry Price) / 365

Consider these examples for ETHYLDZ22: Floating Funding Rate, .BETHYLD, fixes at 4.75%

Stephen is long 20 ETH at 4.00% . So he pays a fixed rate of 4.00% and receives a floating rate of 4.75%. He receives a floating funding payment of :

20 ETH x (4.75% - 4.00%) / 365 = 0.00041 ETH

Dawn is short 50 ETH at 3.500%. So she receives a fixed rate of 3.50% and pays a floating rate of 4.75%. She receives a floating funding payment of :

-50 ETH x (4.75% - 3.50%) / 365 = -0.0017 ETH

i.e. she pays 0.0017 ETH

Floating Funding Fees

BitMEX charges a fee of 0.0005% on floating funding. Consider the examples above:

Stephen was holding a position of 20 ETH. The Floating Funding fee he would pay would be:

20 ETH x 0.0005% = 0.0001 ETH

Dawn was holding a position of 50 ETH. The Floating Funding fee he would pay would be:

50 ETH x 0.0005% = 0.00025 ETH

How is the Floating Funding Rate calculated from Lido?

The floating rate (.BETHYLD) is the expected user yield calculated using information available from Lido:

• the preTotal: how much stETH was there at the previous reward
• the postTotal: how much stETH was there at the last reward
• the timeElapsed: how long between those rewards in years
• the Fee Lido charges - currently 10%

protocolAPR = ((postTotal - preTotal) / (preTotal)) * (1 / timeElapsed)
.BETHYLD    = protocolAPR * (1 - Fee)

Here is an example from 21 November 2022:

preTotal    = 4750691.2455 
postTotal   = 4751462.3972
timeElapsed = 86400 seconds = 0.00273972 years
Fee         =  10%

The Protocol APR is calculates as:

protocolAPR = ((postTotal - preTotal) / (preTotal)) * (1 / timeElapsed)
            = ((4751462.3972 - 4750691.2455) / (4750691.2455)) * (1 / 0.00273972)
            = 5.9247%

Which means a Floating Funding Rate of:

.BETHYLD    = protocolAPR * (1 - Fee)
            = 5.9247% * (0.9)
            = 5.3323%