To ensure the socialized loss process would not disproportionately affect longer-term traders who hold trades for multiple days or even months, Deribit has a daily settlement system. Every day at 08:00 UTC, as long as the insurance fund has not been depleted (i.e. there is no socialized loss situation), all the profits from the previous session are fully transferred to traders’ cash balances.
If there has never been a socialized loss on Deribit, what does this mean in practice for my account?
There is one major difference you will notice in Deribit’s UI that may not be present in other exchanges you have used, and this is the daily sessions.
‘Session’ profits come in the form of session UPL (unrealized profit and loss) and session RPL (realized profit and loss). Both of these figures are calculated from the previous daily settlement at 08:00 UTC and reset to zero every day at the same time.
Session UPL is the unrealized profit and loss for that day’s session, in other words, how much profit the currently open position has made since the previous 08:00 UTC daily settlement.
Session RPL is the realized profit and loss for that day’s session, in other words, how much profit has already been ‘locked’, by closing part of the position for example, since the previous 08:00 UTC daily settlement.
Both session UPL and RPL are figures calculated since the time of the previous daily settlement, not over the whole life of the trade. Therefore, it is very common to see UPL and RPL figures that differ from the total profit/loss given in the PNL column.
Trader opens a long 1 BTC position on a BTC/USD futures contract.
On the first day, the price moves up by $100. At this point, both the total PNL and the session UPL are the same at $100. At the next daily settlement at 08:00 UTC, the price is still up $100, but the session stats are reset to zero for the start of the new session. At this point, the PNL will still be $100, but the UPL will be $0.
On the second day, the price continues to increase and is up by another $50. At this point, the session UPL will be $50, and the total PNL will be the sum of both days, $150. At the next daily settlement, the session UPL is again reset to $0.
On the third day, the price moves in the opposite direction and decreases by $20. At this point, the session UPL will be -$20 (a $20 loss). The total PNL though will still show the sum from all three days since the opening of the trade i.e. $100 + $50 – $20 = $130.
On each of these days, any session profits are not available for transfer or withdrawal until after the next daily settlement at 08:00 UTC.
In the example above, the trader made $100 profit on the first day, however, this would not have been available for withdrawal until the settlement at the start of day two. Similarly, when $50 profit was made on the second day, this would not have been available for withdrawal until after the settlement at the start of day three and so on.
This restriction only applies to session profits. Any existing funds or previous day’s profits are available for withdrawal at any time (unless they are being used as margin for other positions). It should also be noted that even though profits can be withdrawn only after the daily settlement, all funds, including session profits, are available to use for trading at any time.
- The deribit insurance fund ensures payout to profitable traders even when liquidated traders go bankrupt.
- The insurance fund does not cover the losses of liquidated traders.
- It is funded by the liquidation fee added to all liquidation orders (not just the trades resulting in bankruptcy).
- All daily profits/losses are transferred to the trader’s cash balance at the daily settlement at 08:00UTC.
- Any profits of the day are available for withdrawal after the daily settlement.