Independent guide to perpetual markets
Perpetual futures, commonly called perps, let traders take long or short positions without owning the underlying asset and without managing a fixed contract expiration.
They combine the flexibility of spot trading with the capital efficiency of derivatives, making them useful for speculation, hedging, arbitrage and professional risk management.
A perpetual future is a derivative contract that follows the price of an underlying market without expiring on a predetermined date.
The trader does not normally own the underlying asset. Instead, the contract creates financial exposure to its price.
A long position benefits when the contract price rises. A short position benefits when it falls.
Because there is no settlement date forcing the contract toward the underlying price, perpetual markets use funding payments, index prices and mark-price systems to help keep the contract aligned with the reference market.
Perpetual futures became popular because they remove much of the friction associated with traditional futures trading.
Traditional futures expire on a fixed date. Traders who want to maintain their exposure must close the expiring contract and open a new one.
Perpetual futures remove this rollover process. A position can remain open for as long as the trader maintains sufficient margin and the market continues to exist.
A trader can go long when expecting the market to rise or short when expecting it to fall.
There is no need to own the underlying asset before opening a short position, and no need to sell a long-term portfolio simply to reduce market exposure temporarily.
Margin allows traders to control a position whose value is larger than the collateral posted.
This can make capital more efficient, although the same mechanism also increases the speed at which losses can reduce account equity.
Perpetual futures can be used to offset the risk of an existing spot position.
A Bitcoin holder, for example, may open a short Bitcoin perp to reduce short-term price exposure without selling the Bitcoin itself.
Crypto perpetual markets commonly trade around the clock. Traders can open, reduce or hedge positions without waiting for a traditional exchange session to reopen.
Perpetual contracts are also expanding beyond crypto into stocks, indexes, currencies and commodities.
Perps are not used only to make leveraged bets on price. They can also support:
Perpetual futures are not automatically better than spot, dated futures, margin trading or CFDs. They solve different problems and introduce different costs.
| 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 | No perpetual funding | Requires the capital to buy the asset |
| Traditional 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 |
| CFDs | No ownership required | Usually no fixed expiry | Straightforward | Broker financing charges | The broker is the direct counterparty |
Perpetual futures are often preferred when a trader wants continuous long or short exposure without owning the asset or rolling an expiring contract.
Spot trading remains more suitable when ownership is the goal, while dated futures may be preferable for fixed-horizon hedging and institutional strategies.
Understanding these four mechanisms is essential before opening a perpetual position.
Funding consists of periodic payments exchanged between long and short traders. When a perpetual contract trades above its reference market, funding is often positive and longs pay shorts. Funding helps discourage the price from drifting too far from the underlying market.
Explore Funding RatesMargin is the collateral supporting a position. Initial margin helps open it; maintenance margin is the minimum equity required to keep it open. Margin may be isolated or shared depending on the platform and account mode.
Explore MarginLeverage determines how much market exposure a trader controls relative to collateral. It does not make the underlying trade more profitable; it magnifies profit or loss relative to capital used.
Explore LeverageIf losses reduce account equity below the maintenance requirement, a platform may partially or fully close the position. This can cause the trader to lose most or all allocated margin.
Explore LiquidationImagine that Bitcoin trades at $100,000. A trader opens a $10,000 long perpetual position using $2,000 of margin.
| Entry price | $100,000 |
|---|---|
| Position size | $10,000 |
| Margin posted | $2,000 |
| Effective leverage | 5× |
| Exit price | $103,000 |
| Market movement | +3% |
| Gross profit | $300 |
| Return on margin | +15% |
The Bitcoin price increased by 3%, but the return on posted margin was 15% before fees and funding. The same leverage also works in the opposite direction: a 3% price decline would produce a $300 loss before costs.
The position’s final result depends on entry and exit prices, position size, maker or taker fees, funding payments, spread and slippage, collateral value, and whether the position is liquidated.
Perpetual futures first became widely associated with cryptocurrency trading, but the structure can be applied to almost any market with a reliable reference price.
Crypto markets include perpetual contracts linked to Bitcoin, Ethereum, Solana, XRP, DeFi tokens, memecoins, pre-launch tokens and crypto market indexes.
A growing number of platforms provide perpetual exposure to individual stocks, equity indexes, forex pairs, precious metals, energy markets, agricultural commodities, interest rates and volatility.
Pricing, regulatory status and liquidity can vary considerably.
Explore centralized exchanges, on-chain protocols and new platforms providing access to perpetual futures.
Platform availability, products and restrictions vary by jurisdiction. Inclusion does not constitute an endorsement.
Understand contract types, pricing, funding, margin, leverage, liquidation, orders and market data.
Explore LearnCompare centralized and decentralized platforms by liquidity, fees, funding, custody and risk systems.
Explore ExchangesDiscover perpetual contracts linked to cryptocurrencies, stocks, indexes, currencies, commodities and other financial markets.
Explore MarketsExplore calculators and resources for understanding PnL, margin, liquidation and funding.
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