Example 1: 31 Days to Maturity

Scenario

  • Trade Date: October 24th

  • Contract Maturity: November 24th (31 days to maturity)

  • Notional Value: $10,000

  • Protocol Fee Percentage: 0.03%

  • Fixed LP Fee: 0.21%

  • Variable LP Fee Factor: 10%

  • Assumed Price Impact: 0.10%

Time to Maturity

  • Seconds to Maturity: Seconds to Maturity = 31 days ร— 24 hours/day ร— 60 minutes/hour ร— 60 seconds/minute Seconds to Maturity = 2,678,400 seconds

  • Seconds in a Year: Seconds in a Year = 365 days ร— 24 hours/day ร— 60 minutes/hour ร— 60 seconds/minute Seconds in a Year = 31,536,000 seconds

  • Coefficient: Coefficient = Seconds to Maturity รท Seconds in a Year Coefficient = 2,678,400 รท 31,536,000 Coefficient โ‰ˆ 0.085

LP Fee Percentage

From the assumed price impact of 0.10% and the 10% variable fee factor, the additional LP fee is:

Variable LP Fee = 0.10% ร— 10% = 0.01%

Thus, the total LP fee is

LP Fee Percentage = Fixed LP Fee + Variable LP Fee

= 0.21% + 0.01% = 0.22%

Calculations

Combined Fee Percentage:

Combined Fee Percentage = LP Fee Percentage + Protocol Fee Percentage Combined Fee Percentage = 0.22% + 0.9% Combined Fee Percentage = 0.31% or 0.0031 in decimal form

Total Fee: Total Fee = Notional Value ร— Combined Fee Percentage ร— Coefficient Total Fee = $10,000 ร— 0.0031 ร— 0.085 Total Fee = $2.635

Interpretation

The total fee for opening a position with a notional value of $10,000 and 31 days to maturity is approximately $2.63.

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