Before creating a conditional order, a trigger price method needs to be selected. The trigger price method influences at which type of price the stop condition is met. On thalex the Mark price, Last price or Index price can be selected for this. These are further elaborated below.
DISCLAIMER: Please note that the selected trigger price method can significantly affect the timing of when your order is triggered.
Mark price trigger method
If the mark price is used as a trigger method, the mark price of the applicable contract is used to determine whether the condition of the conditional order has been met.
The mark price of futures consists of the index and a 30 second exponential moving average (EMA30) of the premium, updated approximately every second. The premium is the difference between the index and the constrained last market price. The restraining effect of the mark price reduces the risk that an order will be triggered by deep executions. Consequently, in fast market movements the mark price trails the last price due to the restraining effect of the mark price.
Last price trigger method
If the last price is used as a trigger method, the price of the last trade that has occurred is used to determine whether the condition of the conditional order has been met.
The risk of the last price being the applicable trigger method is that an order may be triggered by deep executions without the certainty that the price stays at that level. Furthermore, an order may be triggered late if there is limited trading in the relevant contract.
Index price trigger method
If the index price is used as a trigger method, the index price of the applicable contract is used to determine whether the condition of the conditional order has been met.
Thalex computes each index price based on order book data from a number of spot exchanges. The calculation has four steps:
- Obtain a list of prices from the relevant exchanges. The price from an exchange is calculated as the average of best bid and ask in the order book.
- Calculate the median of available prices.
- Cap each price to deviate at most 0.5% from the median.
- Calculate the simple average of capped values to obtain the index price.