Differentiate between a “Perpetual Swap” and a Traditional Futures Contract.
A traditional futures contract has a fixed expiration date, while a perpetual swap does not expire. Perpetual swaps use a "funding rate" mechanism to anchor their price to the underlying spot price.
Futures contracts converge to the spot price at expiration. Perpetual swaps are common in cryptocurrency derivatives markets.
Glossar
Quarterly Futures Contract
Expiration ⎊ A quarterly futures contract is a derivative agreement with a specific expiration date occurring at the end of a calendar quarter.
Perpetual Swap
Mechanism ⎊ Perpetual swaps, within cryptocurrency markets, represent agreements to exchange cash flows based on the difference between a cryptocurrency’s current price and a user-defined price, perpetually, without an expiration date.
Traditional Futures Contract
Contract ⎊ A Traditional Futures Contract is a standardized, legally enforceable agreement traded on a regulated exchange, obligating the buyer to purchase, and the seller to sell, a specified quantity of an underlying cryptocurrency asset at a predetermined price on a fixed future date.
Perpetual Swaps
Derivatives ⎊ Perpetual swaps represent a class of financial derivatives, specifically within the cryptocurrency ecosystem, that replicate the payoff of a futures contract without a fixed expiration date.
Traditional Futures
Derivation ⎊ Traditional Futures, within cryptocurrency and financial derivatives, represent standardized contracts obligating the holder to buy or sell an underlying asset at a predetermined price on a specified future date, differing from perpetual contracts through explicit expiry.
Cryptocurrency Derivatives
Function ⎊ These financial instruments derive their valuation from an underlying cryptocurrency, enabling sophisticated risk transfer and speculation without direct asset ownership.