Perpetual Futures Contracts Explained

Introduction To Perpetual Futures Contracts

“Perpetual future contracts” is the recent trading feature of many cryptocurrency exchanges and becomes popular among cryptocurrency traders. Understanding the concept of Perpetual Contracts (or)Perpetual trading will become easy if we can understand the concept of conventional futures contracts.

Perpetual Futures Contracts

Perpetual which means - Never Ending, so there is no expiry date.

As Said above,

Perpetual Contracts are the advanced derivative of conventional futures contracts, whereas it doesn’t have any specific expiry date so that the buyer or seller can hold their assets/position as long as they choose. In other words, one can buy the contract when the price will be subjected to rise in the future and conversely can sell the contract if the price is subjected to slump in the future.

Difference Between Futures and Perpetual Contracts

Perpetual Future Contracts and Traditional Futures Contracts likely to be the same, but the only and the major difference is, Perpetual Contracts Doesn't Have any Expiry Dates.
And another significant difference is, perpetual contract receives funding fees, but in the futures contract, it won’t do it.
Since a perpetual contract doesn’t have an expiry, it is likely to be considered as Spot- Trading but, with leverage. So, that we can trade nearly at the price of the current market value of the indexed asset, commodity, or crypto.

Characteristic of Perpetual Contracts

No Expiry Date
Mark Price
Dual Price Mechanism
Initial Margin & Maintenance Margin
Funding
Increased Leverage Ratio From 10X to 100 x or more
Auto Deleveraging

Originally Published : What are Perpetual Futures Contracts