Just saw that OKX launched pre-market contracts for SpaceX, OpenAI, and Company A. Thought it’d be a good chance to chat about the underlying mechanism of pre-market contracts. First off, the profit and loss of regular perpetual contracts are determined by the mark price (e.g., a weighted average spot price collected from 5-10 exchanges). Then, perpetual contracts use funding rates to force the contract price to converge with the mark price. But for pre-market contracts, since there’s no spot price, the mark price can only be derived from the order book prices of the contract itself. As a result, its funding rate has to stay at 0 long-term, meaning longs and shorts don’t pay each other. This pre-market contract is completely different from the design mechanism of the OpenAI and SpaceX futures previously offered on Robinhood. With Robinhood, they acquired SpaceX preferred shares and OpenAI convertible bonds from certain institutions and turned them into derivatives for early trading. On the other hand, pre-market contracts rely more on internal user speculation (aka “mutual XX-ing”), which makes their volatility higher.