USDC Perpetual Contracts adopt a session settlement mechanism to settle the unrealized profit and loss in the position into a realized profit and loss, which is reflected in the wallet balance account to improve the utilization rate of your assets.
This settlement occurs at the same time as the funding rate interval. Different contracts have different settlement intervals, example: 1 hour, 2 hours, 4 hours, or 8 hours. Any update to the funding rate interval also updates the session settlement interval, example: when a USDC Perpetual Contract funding interval is updated from 8 hours to 4 hours interval, session settlement will be updated from 8 hours to 4 hours interval as well. Once the settlement time is reached, the average entry price will be updated to the Mark Price at the time of settlement.
Note: For newly listed contracts, the default funding rate interval and session settlement interval are set to 4 hours.
Let’s take the position change of Trader A between 4PM UTC and 12AM (midnight) UTC as an example to see how the 8-hour session settlement mechanism works.
Current Settlement Cycle (Between 4PM UTC and 12AM (midnight) UTC)
Trader A currently holds a 0.1 BTC-PERP long position with an entry price of $50,000. He now places another 0.1 BTC-PERP long position at $50,500.
The average entry price is calculated as follows:
Average Entry Price = Total Session Value/Total Trade Size
= (0.1 × 50,000 + 0.1 × 50,500)/0.2
= $50,250
Now that the market price has increased to $50,700 and the current Mark Price is $51,000, Trader A partially closes his 0.1 BTC position. The unrealized and realized profit is calculated as follows:
Realized P&L = (Exit Price - Average Entry Price) × Contract Quantity
= (50,700 - 50,250) × 0.1 = 45 USDC
Unrealized P&L = (Current Mark Price - Average Entry Price) × Contract Quantity
= (51,000 - 50,250) × 0.1 = 75 USDC
For more information on how to calculate the profit and loss for USDC Perpetual and USDC Futures Contracts, please visit here.
Settlement Process at 12AM (midnight) UTC
The Mark Price at settlement time (12AM UTC) is $52,000. The unrealized P&L for the current settlement cycle is calculated as follows:
Formula
Session Unrealized P&L = (Current Mark Price - Average Entry Price) × Contract Quantity
= (52,000 - 50,250) × 0.1 = 175 USDC
The current session unrealized P&L is 175 USDC. The profit of 175 USDC will be credited to your wallet balance. The new average entry price is now been updated to $52,000.
A new settlement cycle starts and any profit or loss will now be calculated based on the new average entry price of $52,000.
Assuming Trader A closes the position before the next settlement cycle at 8AM UTC, the realized profit or loss will be calculated based on the price difference between $52,000 and the exit price. The fee to close will be charged.