Guide
What Are Perpetual Futures? Mechanics and Risks
Bottom line: leverage trading with no expiry
Perpetual futures ("perps") are futures contracts with no settlement date, so a position can be held indefinitely. They allow leverage, letting you trade a large position with little capital.
Key points
- No expiry, so positions aren't auto-settled
- A periodic "funding rate" between longs and shorts keeps the price near spot
- Leverage means a high risk of liquidation
The funding rate
Without an expiry, the price can drift from spot. To prevent this, longs and shorts periodically pay each other a fee (the funding rate) that nudges the price back toward spot.
A high-risk product
With leverage, a small adverse move can exhaust your margin and force-close your position. Beginners should understand the mechanics fully and start with spot.
Not financial advice
This article is for information only and is not investment advice. Crypto assets are volatile and carry risks including hacking. Do your own research and only use money you can afford to lose.
This article is informational only and is not financial, investment, or trading advice. Prices are reference snapshots and may be outdated. Always do your own research.
