What Is the Premium Index in Perpetual Futures?
The Premium Index in perpetual futures is the measured difference between a perpetual contract's price and its underlying spot index price, expressed as a percentage and recalculated continuously throughout each funding interval. This premium index is one of the two core inputs used to derive the funding rate — the periodic payment exchanged directly between long and short position holders every 8 hours on Pluang's Crypto Futures — alongside an interest rate component. When the perpetual contract trades above the spot index, the premium index is positive and longs pay shorts, pulling the contract price back down toward spot. When it trades below the spot index, the premium index is negative and shorts pay longs instead.
Key relationships:
- A sustained positive premium index signals long positions outweigh short positions, and the funding payment from longs to shorts brakes that imbalance.
- A sustained negative premium index signals a heavier short bias, so shorts pay longs instead.
- The premium index is distinct from Mark Price, which Pluang uses for unrealized PnL and liquidation.
- Because perpetual contracts have no expiry date, the funding rate mechanism, driven by the premium index, keeps the contract price anchored to spot instead.
Related questions:
Q: How is the funding rate different from the premium index?
The funding rate is the final payment rate exchanged every 8 hours, combining the premium index with an interest rate component. The premium index alone only measures the price gap between the contract and the spot index.
Q: What does a positive Premium Index mean for my position?
It means the contract is trading above the spot index, so long position holders pay the funding rate to short position holders every 8 hours, directly between traders.
Q: Is the Premium Index the same as Mark Price?
No. The Premium Index feeds into the funding rate calculation. Mark Price is a separate figure used for unrealized PnL and liquidation.
Q: Why does the Premium Index matter for perpetual contracts specifically?
Perpetual contracts have no expiry date to force convergence with spot, so the premium index, fed into the funding rate, performs that job instead.