What Is a ‘Perpetual Futures Contract’?
A perpetual futures contract is a derivative agreement to buy or sell an asset at a future price, but unlike traditional futures, it has no expiration date. It is a key instrument in cryptocurrency derivatives markets.
To keep the contract price anchored to the spot price, a mechanism called the 'funding rate' is used, where traders on one side of the contract periodically pay the other side.
Glossar
Derivative Agreement
Structure ⎊ A derivative agreement, within cryptocurrency, options trading, and financial derivatives, establishes the terms for exchanging cash flows based on an underlying asset or index; its core function is risk transfer and price discovery, facilitating exposure without direct ownership.
Perpetual Futures Contract
Mechanism ⎊ Describes the unique funding rate system that replaces traditional expiry dates, aligning the contract price with the underlying spot market.
Contract Price
Agreement ⎊ Within cryptocurrency derivatives and options trading, the Agreement represents the legally binding articulation of the price stipulated for a future transaction, reflecting a convergence of expectations between counterparties.
Cryptocurrency Derivatives
Function ⎊ These financial instruments derive their valuation from an underlying cryptocurrency, enabling sophisticated risk transfer and speculation without direct asset ownership.