What are perpetual futures?

How a perpetual differs from a dated future

A dated future settles on a fixed day, and its price converges on the spot price as that day approaches. A perpetual has no settlement day, so nothing forces convergence. Exchanges solve this with the funding rate: when the perp trades above spot, longs pay shorts, and when it trades below, shorts pay longs.

Because there is no expiry, a position can stay open as long as its margin holds. That convenience is the reason perpetuals carry most of the trading volume in crypto derivatives.

Margin, leverage and position size

To open a position you post margin, a fraction of the position’s value. Leverage is the ratio between the two: $1,000 of margin controlling a $10,000 position is 10× leverage.

Profit and loss are calculated on the full position, not on the margin. A 1% move on a $10,000 position is $100, which is 10% of that $1,000 margin. The same arithmetic applies to losses.

What a perpetual costs to trade

Three costs apply, and only the first appears on a fee schedule.

• Trading fees: a maker or taker fee on every fill, charged on the full position value.
• Funding: paid or received at each funding interval while the position is open.
• Spread and slippage: the difference between the price you expected and the price you got.

Linear and inverse contracts

A linear contract is margined and settled in a stablecoin such as USDT or USDC, so profit and loss are in dollars. An inverse (coin-margined) contract is margined in the asset itself, so both your position and your collateral move with the price. Linear contracts are the simpler of the two for most traders.

The main risk: liquidation

If losses reduce your margin below the maintenance requirement, the exchange closes the position. With high leverage that takes a small move: at 20× a move of under 5% against you is enough. Perpetuals can lose the whole margin posted, quickly, and are not suitable for most people.

Where to go next

Common questions