What are perpetual futures?
A perpetual future is a contract on a coin's price with no expiry date. You do not own the coin. You can go long or short with leverage, and a funding rate keeps the contract price near the spot price.
Spot compared with perpetual futures
| Spot | Perpetual futures | |
|---|---|---|
| You own the asset | Yes | No |
| Expiry | None | None |
| Leverage | No | Yes |
| Liquidation | No | Yes |
| Costs | Trading fee | Trading fee and funding fee |
| Ways to profit | Price rises | Price rises (long) or falls (short) |
How the price stays near spot
With no expiry date, a perpetual needs another mechanism to stay close to the spot price. That mechanism is the funding rate. At set intervals, longs pay shorts when the contract trades above spot, and shorts pay longs when it trades below. HedgerX settles funding every 8 hours and does not collect it.
Margin and leverage
You post margin, which is a fraction of the position’s value, and the contract controls the whole position. At 10x leverage, 100 USDT of margin controls 1,000 USDT of contract. A move of about 10% against you uses up the margin and triggers liquidation. See leverage and margin.
The risks
- Leverage amplifies losses exactly as much as gains.
- The exchange can liquidate your position by force.
- Holding through a funding settlement adds a funding fee.
- In volatile markets the contract and spot prices can drift apart. That is why exchanges use a separate mark price for liquidation. See index, mark and last price.
This page is not financial advice.
Frequently asked questions
How is a perpetual future different from a delivery future?
A delivery future has a set expiry date and settles then, weekly, monthly or quarterly. A perpetual has no expiry and can be held as long as margin requirements are met.
Do I own the coin when I trade a perpetual?
No. You trade a contract. Profit or loss comes from the difference between your entry and exit prices, not from delivery of the coin.
Open a HedgerX account
Registration takes a few minutes. HedgerX states that its services are not available in China, Turkey, Kazakhstan and Indonesia. Futures trading can liquidate your position. This page is not financial advice.
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