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What is LNM futures?

LNM Futures is a derivative perpetual futures contract whose underlying asset is a weighted basket of BTCUSD perpetual futures from multiple exchanges, such as Bybit, Binance, Deribit or BitMEX.

It is designed to capture the performance of various BTC/USD perpetual contracts across different exchanges or platforms.

Key characteristics

Diversification of Exchange Risk: This construction helps mitigate the risks associated with any single exchange. If a particular exchange experiences disruptions, LNM Futures would still be exposed to the performance of BTC/USD on other exchanges.

Reduced Impact of Funding Rates: Since perpetual futures have a funding rate to maintain price parity with the spot market, an aggregated basket balances out extreme funding rate variations across platforms.

Efficient Exposure to Market-Wide BTC/USD: Traders have a single product that gives them exposure to a broader market view of BTC, instead of betting on the price from a single exchange, which might have unique influences (liquidity, trader sentiment, etc.).

Improved liquidity: Since the trade is executed across a basket of order books, LNM can provide significantly better liquidity than what a trader would typically find on a single exchange.

Price reference

The BTCUSD Basket Last Price serves as the benchmark for calculating profit and loss (P&L) and triggering events such as liquidation, take profit, or stop loss. It is a weighted average of the last traded prices of BTC/USD perpetual futures from the exchanges included in LN Markets’ selected basket. The current composition of the basket is as follows:

ExchangeWeight
BitMEX60%
Bybit20%
Deribit20%
Binance0%

This composition may be modified without prior notice.

Market liquidity

LN Markets provides continuous pricing for buying or selling any quantity of LNM Futures. However, the liquidity available for different quantities can fluctuate based on market conditions. This means the price quoted by LN Markets may vary depending on the size of the trade, with larger quantities potentially impacting the price offered.

To help traders understand this liquidity variation, the volume ladder is a visual tool that displays the immediate liquidity available on LN Markets. It shows how much can be bought or sold at different price levels in real time, giving traders insight into how their order size might affect the price and helping them make informed trading decisions.

Any trading event is affected by the market liquidity.

⚙️ Example for a liquidation: consider a trader holding a long position worth USD 150,000, with a liquidation level set at 92,000. The Price reference, which determines the position’s value, is currently at 92,030. At the same time, the volume ladder indicates that the highest available bid for this quantity (USD 150,000) is at 92,010.

However, due to changes in market liquidity, the bid price for this quantity drops below the liquidation threshold of 92,000. When this happens, the position automatically gets liquidated, as the market can no longer support the position without additional margin.

This process ensures the platform minimizes losses by closing the position before its value falls further below the margin requirements. It highlights how liquidity variations can impact large positions, especially near critical thresholds like liquidation levels.

LNM Futures contract specification

DescriptionValue
Price ReferenceBTCUSD Basket Last Price
P&LQuantity X (1/Entry Price - 1/Price Ref)
Liquidation Level(1 / Entry Price + Trading Margin / Quantity)^-1
Max leveragex100
Max quantity per tradeUSD 500,000
Max quantity per accountUSD 10,000,000

Leverage

Leverage in trading is an investment strategy that allows one to gain exposure to a financial asset with a smaller upfront capital, known as margin.

Leverage is a double-edged sword. With a leverage of 1, you are exposed to the variations of the underlying asset. With a leverage of 2, for a long position, when the underlying asset increases by 1, your P&L increases by 2. But when the underlying asset decreases by 1, your P&L decreases by 2. And vice versa for a short position.

On LN Markets, leverage is limited to x100.