Perpetual futures, commonly called perps, let traders take long or short exposure to a market without owning the underlying asset. A position has no fixed expiry and can remain open while sufficient margin is available and the market continues to exist.
A perpetual future is a margin-based derivative that provides continuous long or short exposure to a reference market.
Unlike spot trading, the trader does not normally own the underlying asset. Unlike a dated future, the contract has no scheduled expiry. The position remains open until the trader closes it, insufficient margin causes liquidation, or the market is discontinued.
Funding payments, index prices and mark-price systems help keep the perpetual contract connected to its reference market.
The contract tracks a reference market such as BTC.
BTC-USDT perpGo long if you expect the market to rise, or short if you expect it to fall.
You post collateral to open a position and control a larger exposure.
$2,000 margin $10,000 positionThere is no fixed expiry. Funding applies while the position remains open, and liquidation can happen if margin becomes insufficient.
In short: a perpetual future is a margin-based contract that lets you trade market direction continuously without owning the underlying asset.
The main advantage of a perpetual future depends on the product you already use. The same contract may solve a different problem for a spot trader, a CFD trader, a futures trader or a portfolio holder.
Main advantage: Short or hedge without selling
Perpetual futures make it possible to take short exposure without first owning the asset. They can also hedge a spot holding without requiring the investor to sell it.
Trade-off: You do not own the underlying asset, and the position introduces funding, margin and liquidation risk.
Main advantage: Shared-market pricing
Many perps trade on shared order books or on-chain markets, with prices and funding visible to participants rather than set solely by one broker.
Trade-off: Funding is not always cheaper. Total cost still depends on fees, spread, slippage and holding time.
Main advantage: No expiry or rollover
A perpetual contract has no scheduled expiry, so maintaining exposure does not require closing an expiring contract and opening the next one.
Trade-off: Funding may continue for as long as the position remains open.
Main advantage: No direct asset borrowing
Short exposure does not normally depend on borrowing the underlying asset directly from a lending market. The position is created through the perpetual contract itself.
Trade-off: Funding, margin requirements and liquidation still apply.
Main advantage: Simpler linear exposure
Perpetual futures provide linear directional exposure without requiring the trader to choose a strike or manage option expiry, implied volatility and time decay.
Trade-off: Perps do not provide the asymmetric payoff, volatility exposure or predefined maximum loss available through some option strategies.
Main advantage: Hedge without selling
A short perpetual position can reduce part of the market risk of a spot portfolio without requiring the underlying assets to be sold.
Trade-off: The hedge may be imperfect and can introduce basis, funding, collateral and platform risk.
Perpetual futures are not automatically better than spot trading, CFDs, dated futures, margin trading or options. They offer a different combination of ownership, short exposure, expiry, financing and risk.
The relevant comparison depends on what the trader already uses and what problem the position is intended to solve.
| Product | Ownership | Expiration | Short Selling | Typical Ongoing Cost | Main Trade-Off |
|---|---|---|---|---|---|
| Perpetual futures | No ownership required | No fixed expiry | Straightforward | Funding may apply | Margin and liquidation risk |
| Spot trading | Own the underlying asset | No expiry | Usually less direct | Usually none beyond custody, trading or borrowing costs | Requires capital to buy the asset |
| CFDs | No ownership required | Usually no fixed expiry | Straightforward | Broker financing may apply | Pricing, financing and counterparty model depend on the broker |
| Dated futures | No ownership required | Fixed expiry | Straightforward | Contract pricing and rollover costs | Positions may need to be rolled |
| Margin trading | Borrowed spot exposure | No fixed expiry | Possible through borrowing | Borrowing interest | Availability and borrowing costs vary |
| Options | No ownership required | Usually fixed expiry | Expressed through contract structure | Upfront premium; time decay affects contract value | More complex pricing, but flexible and asymmetric payoffs |
Regardless of whether the trader comes from spot, CFDs, futures or options, every perpetual position depends on the same core elements: the contract specification, margin, price references, funding and liquidation rules.
Confirm the underlying market, collateral, price index and product specification.
Leverage changes the relationship between position size and posted collateral.
Funding can add a cost or credit; the mark price is often used for unrealized PnL and liquidation.
If equity falls below maintenance requirements, the platform can close some or all of the position.
Imagine Bitcoin trades at $100,000. A trader opens a $10,000 long perpetual position with $2,000 of margin, creating an effective 5× exposure.
A 3% move to $103,000 produces $300 in gross PnL before fees, funding, spread and slippage. That is 15% of the margin posted; a 3% fall produces the same gross loss.
For a spot trader, the important difference is that an equivalent-sized short position could produce a gross profit if Bitcoin fell by 3% instead of rising by 3%. The short position would still be affected by fees, funding, spread, slippage and liquidation risk.
Illustrative example only. Costs and liquidation risk are not included in this simplified calculation.
A similarly named contract can differ by index, collateral, funding formula and jurisdiction. Start with the market, then verify access and platform rules.
Compare crypto, equities, indexes, currencies, commodities and other perpetual market families.
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Learn the mechanics behind funding, pricing, margin, leverage, liquidation and execution.
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