Virtual contracts serve as the trading instruments in contract markets, standardized agreements established by exchanges that specify the delivery of a particular quantity of goods at a predetermined future date. This guide explores their mechanics and trading strategies.
1. Understanding Virtual Contracts
Virtual contracts represent binding agreements between buyers and sellers, defining their rights and obligations. For instance:
- A buyer agreeing to purchase 10 tons of soybeans at $5,000/ton by a set date secures both the right and obligation to do so.
- Conversely, the seller commits to delivering the goods under the same terms.
Most traders don't physically settle these contracts. Instead, they capitalize on price fluctuations by trading the contracts before expiration.
Key Features:
- Standardized terms (quantity, quality, delivery date)
- Tradable on exchanges like OKEx
- Used primarily for speculation or hedging
2. Step-by-Step Trading Process
a) Market Analysis & Contract Selection
- Determine market direction (bullish/bearish) for assets like BTC
Choose contract types on OKEx:
- Weekly: Expires nearest Friday
- Bi-weekly: Expires the following Friday
- Quarterly: Expires end of March/June/September/December
👉 Explore OKEx's contract types
b) Order Execution
- Select entry price and position size
- Required initial margin = Contract value ÷ Leverage
- Ensure account equity covers the margin
c) Margin Modes Compared
| Feature | Cross Margin | Isolated Margin |
|---|---|---|
| Risk Calculation | Portfolio-wide | Position-specific |
| Liquidation | When equity ≤ 10% (10x) or 20% (20x) | When position margin ≤ 10%/20% |
| Flexibility | Shared across positions | Independent per contract |
d) Position Management
- Monitor unrealized P&L (profit/loss)
Adjust positions via:
- Partial closes to lock gains
- Additional openings to compound returns
e) Settlement at Expiry
- Open positions auto-settle at the delivery index price
- Profits credited as "Realized P&L"
- Losses from bankrupt accounts distributed proportionally among profitable traders
3. Key Terminologies
- Leverage: Amplifies exposure (e.g., 10x = 10% margin)
- Delivery Index: Reference price for settlements
- Force Liquidation: Automatic closure of under-margined positions
4. FAQs: Virtual Contracts Demystified
Q: Can I change margin modes after opening positions?
A: Only when no active orders or holdings exist.
Q: How does liquidation work in cross margin?
A: Entire account equity is pooled; liquidation occurs if total equity drops below the maintenance threshold.
Q: What happens if I hold a contract until expiry?
A: It settles automatically at the delivery price—no physical asset transfer.
Q: Are virtual contracts suitable for beginners?
A: Yes, but start with lower leverage (5x–10x) to manage risk.
5. Strategic Considerations
- Volatility Management: Use stop-loss orders to cap losses
- Diversification: Spread exposure across multiple contract types
- News Sensitivity: Economic events heavily impact crypto contract prices
👉 Master advanced strategies on OKEx
This guide covers the foundational aspects—always verify current exchange rules before trading. For real-time updates, consult OKEx's official announcements.