Perpetual Futures 101

A high level overview of perpetuals

Perpetual futures are derivative contracts that enable traders to gain exposure to underlying assets. Traders can take on leverage to gain increased exposure to asset price movements. Positions can be collateralized using any of the supporting collateral types.

What are Futures Contracts?

A futures contract is an agreement to buy or sell a particular asset at a predetermined price at a specified time in the future. The contract can then be traded until the date it expires. At expiry, the contract is exercised, and the final seller delivers the asset to the buyer.

What are Perpetual Futures?

Perpetual contracts are derivative contracts similar to futures, but with a few key differences.

  1. Perpetuals contracts do not have a expiration date or settlement, meaning they can be held/traded for an indefinite amount of time*.

  2. Perpetual contracts trade closely to their underlying spot price

  3. Perpetual contracts require a funding rate

Benefits of Trading Perpetuals?

💳 Leverage

  • Allows traders to increase their buying power against collateral

📈 Longing

  • Allows traders to bet in favor of the underlying assets providing synthetic exposure

📉 Shorting

  • Allows traders to bet against the underlying assets without the need to own/borrow it.

🦔 Hedging

  • Allows traders to manage their risk across different assets.

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