Module 7: Perpetual Futures
Index Price, Mark Price, and Last Price
Chapter 6 of 14 · about 5 minutes
6.1 Saved by the mark price
Mint had a long BTC perp position with a liquidation price of $95,500. One night, a sudden wick on the exchange's chart touched $95,200 for a few seconds.
Mint woke up expecting the worst. The position was still open.
"The chart went below my liquidation price," said Mint. "Why wasn't I liquidated?"
"Because liquidations don't use the price you see on the chart," said Hash. "They use the mark price. Every perp trader needs to understand the three prices on their screen."
6.2 Three prices
| Price | What it is | Used for |
|---|---|---|
| Last price | The price of the most recent trade on this perp market | The chart, and executing your orders |
| Index price | A weighted average of the spot price across several major exchanges | The reference for "true" spot price, and for funding |
| Mark price | A fair-value estimate based on the index, adjusted for the perp's typical premium or discount | Unrealised PnL and liquidations |
6.3 Index price
The index price represents the underlying asset's spot price. Exchanges build it from several reputable spot exchanges, often weighted by volume, and exclude sources whose prices deviate too far from the others.
| Spot source | BTC price | Weight |
|---|---|---|
| Exchange A | $99,820 | 30% |
| Exchange B | $99,790 | 25% |
| Exchange C | $99,810 | 25% |
| Exchange D | $99,780 | 20% |
| Index price | ~$99,802 |
Using several sources makes the index hard to manipulate. To move it, someone would need to move the price on multiple major exchanges at once.
6.4 Last price
The last price is simply the price of the latest trade on the perp market itself. It's what your chart usually shows.
Because the last price comes from one market, it can spike briefly when a large market order eats through thin order book depth (Module 1, Chapter 11), or when liquidations cascade. These spikes create long wicks on the chart.
6.5 Mark price
If exchanges liquidated positions based on the last price, a single large order, or a deliberate manipulation, could push the price briefly through a cluster of liquidation levels and trigger a wave of unfair liquidations.
So exchanges use the mark price instead. It's typically calculated from the index price, plus a smoothed estimate of the perp's premium or discount to spot. Methods vary, but the goal is the same: a price that reflects fair value and isn't easily moved by a single trade.
| Price | |
|---|---|
| Index price | $99,802 |
| Smoothed perp premium | +$20 |
| Mark price | $99,822 |
| Last price during a wick | $95,200 |
During Mint's wick, the last price briefly dropped to $95,200, but the mark price stayed near $99,800 because the spot markets in the index didn't fall. Mint's liquidation price of $95,500 was never reached by the mark price, so the position survived.
Chapter 6 · Last, index, and mark price
Three price lines move together: the index price averaged across spot exchanges, the mark price that tracks the index with a smoothed premium, and the last traded price. A sharp wick spikes the last price, but liquidations trigger on the mark price, protecting traders from a single-exchange spike.
6.6 When the mark price does move
The mark price protects you from brief, isolated spikes on a single exchange. It doesn't protect you from real market moves.
If the whole market falls, spot prices on all index exchanges fall, the index falls, and the mark price follows. Liquidations then happen normally.
| Situation | Last price | Index and mark price | Liquidation? |
|---|---|---|---|
| A single large order wicks the perp briefly | Spikes down | Barely moves | Usually not |
| The whole market sells off | Falls | Falls | Yes, if mark reaches the liquidation price |
"So the mark price filters out one exchange's noise, but not the whole market's," said Mint.
"Right," said Hash. "Don't treat it as a safety net. Treat it as a fairness rule."
6.7 Which price triggers your orders?
This is a practical detail that catches many traders. When you set a stop-loss or take-profit, many exchanges let you choose which price triggers it: last price or mark price.
| Trigger price | Advantage | Disadvantage |
|---|---|---|
| Last price | Reacts to the actual market you're trading | Can be triggered by brief wicks |
| Mark price | Less sensitive to single-exchange spikes | May trigger slightly later than the move you see on the chart |
Neither is universally better. Know which one your stops use, especially in volatile markets. A stop on the last price can be triggered by a wick that the mark price ignores.
6.8 Unrealised PnL uses mark price
Your unrealised profit and loss is usually calculated using the mark price, not the last price. That's why the PnL number on your screen can differ slightly from what you'd calculate using the chart. When you actually close the position, your realised PnL depends on the price your closing order executes at.
6.9 Index risks
The index is only as reliable as its sources. In rare cases, problems at a source exchange, such as a halt, a hack, or a broken price feed, can distort the index. Exchanges remove sources that deviate significantly, but extreme events can still cause issues. Decentralised perp exchanges face a similar challenge through their oracles (Module 3, Chapter 12), which Chapter 13 discusses.
6.10 Try it yourself
On any perp exchange, find the index price, mark price, and last price for the BTC perpetual at the same moment. Note the differences. Then find the exchange's documentation on how its index is constructed: which spot exchanges does it use, and how are they weighted?
Finally, check whether your exchange lets you choose the trigger price for stop-loss orders, and what the default is.
Key takeaways from this chapter
- Perp markets show three prices: last price, index price, and mark price.
- The index price is a weighted average of spot prices from several exchanges, making it hard to manipulate.
- The last price is the latest trade on the perp market and can spike briefly on thin liquidity.
- The mark price, based on the index plus a smoothed premium, is used for unrealised PnL and liquidations.
- The mark price protects against single-exchange spikes, not genuine market-wide moves.
- Know whether your stops trigger on last price or mark price.
- The index depends on its sources; extreme events at source exchanges can affect it.