Define ‘Mark Price’ in Futures Trading.
The Mark Price is an estimated fair value of a futures contract, used by exchanges to prevent unnecessary liquidations caused by temporary market manipulation or illiquidity. It is typically calculated using a combination of the contract's spot price and a moving average of the futures price.
Exchanges use the Mark Price, not the Last Traded Price, to calculate a trader's unrealized profit and loss (P&L) and to determine when liquidation should occur.
Glossar
Mark Price
Valuation ⎊ The Mark Price within cryptocurrency derivatives represents a fair value estimation, calculated to mitigate price manipulation and ensure orderly market functioning, particularly during periods of low liquidity or volatility.
Last Traded Price
Valuation ⎊ The Last Traded Price (LTP) represents the most recent price at which a cryptocurrency, option contract, or financial derivative changed hands in a given market, serving as a real-time indicator of current market consensus.
Unrealized Profit and Loss
Valuation ⎊ Unrealized profit and loss within cryptocurrency, options, and derivatives represents the hypothetical gain or loss calculated based on the current market price of an asset or contract, contrasted with its initial cost basis.