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What are Perpetuals
Perpetual futures are derivative contracts that enable traders to gain exposure to various underlying assets. Traders can take on leverage, which allows them to gain increased exposure to price movements of the asset, meaning profits and losses both increase significantly. Positions can be collateralized using any of the supported collaterals.
What are futures contracts?
A traditional futures contracts is an agreement to buy or sell an underlying for a certain price at a certain date between two parties. This contract can then be traded around until the date it expires. At expiry, the contract is exercised, and the final seller delivers the underlying to the buyer.
What are Perpetual Futures?
Perpetual futures are futures contracts without expiry dates. This means that the perpetual position can be held for an indefinite amount of time (provided sufficient collateralization).
To hold a perpetual position, buyers (longs) of the contract need to pay a funding rate to sellers (shorts). This allows the derivative to maintain a price that is close to that of the underlying's index price.
Why trade Perpetuals?
- Hedging positions and managing risk across other assets.
- Increasing buying power through leverage by trading volumes larger than your collateral.
- Shorting and betting against an underlying asset without needing to own it or borrow it.
Further reading
Last modified 3mo ago