What is an example of perpetual futures?

While perpetual futures are very common in the crypto space, the BTC-USDT perp pair from Binance is one of the more popular ones around. And like any spot trading pair, even a standard perp futures contract corresponding to the BTC-USDT pair can either be bought or sold, depending on your expectations. Apart from BTC-USDT perpetual futures, you can also pick ETH-based, stablecoin-based, BNB-based, and other crypto-specific perps, with different trading pairs, funding rates, and trading volumes.

What is a perpetual contract?

A perpetual contract is like a futures contract with no expiry date. This means traders entering these buy or sell contracts can keep their positions open for as long as they want. They only need to have sufficient maintenance margin at all times to justify the leverage they are getting.

What is the difference between perpetual futures and standard futures?

The primary difference between a standard futures and a perpetual futures contract is the expiration date. While standard futures contracts come with an expiry date for settlement, perpetual futures are not restricted like that. Also, there is no predefined price-based agreement in the case of perpetual futures, and the settlement can happen at any price, depending on the profit and loss exposure of the trader.

What are the four types of futures contracts?

The four most basic types of futures contracts include financial futures, commodity futures, index futures, and currency futures. As for cryptocurrency-based futures, you can put them in the financial futures category. Also, each contract works with a specific type of market index or asset.

Why is it called perpetual futures?

The name perpetual comes from the fact that these Futures contracts can be held perpetually without the need for an expiry date. Without a defined settlement date, it becomes easier to work with these contracts, adjust the margin, and balance the leverage-specific requirements accordingly. And despite these being perpetual, they still track the spot and index prices of the underlying assets.

What are the features of perpetual futures?

Perpetual Futures have no expiration date — which takes the settlement period out of the question. Also, they are high-leverage financial instruments, follow the concept of funding rate and funding fees, have steep maintenance margin needs, and offer standard market-to-market settlements like cash and carry spot trades.