What are perpetual futures?

How can you hold a “futures” contract that never expires?

Perpetual futures, i.e. futures contracts with no expiry, are also known as perpetuals or perps. Unlike traditional futures, they have no set settlement date. Your position can stay open as long as you meet the platform’s margin requirements and the contract remains available.

Think of an agreement that tracks the difference in a product’s price without the product itself changing hands. With a long position you profit from a price rise, while with a short position you profit from a fall. You don’t acquire the cryptocurrency itself, as you do on the spot market.

To keep the contract’s price close to the spot price, a funding rate is usually used. It sets periodic payments between those holding long and short positions. When it is positive, longs usually pay shorts; when it is negative, the reverse happens. The frequency and details vary by platform.

Why it matters

Perps allow both speculation and hedging: someone who holds a crypto can, for example, use a short position to limit their exposure to a drop. But this adds costs and requires management.

With leverage, the value of the position can exceed the collateral you have deposited. Hypothetically, €100 of collateral at 10x leverage corresponds to a €1,000 position. A 1% move means roughly €10 of profit or loss, before fees and funding.

What to watch out for

No expiry doesn’t mean no forced closing. If the collateral is no longer sufficient, the platform can forcibly close the position through liquidation. This can happen before the entire initial collateral is used up.

We consider the distinction between the cost of opening and the cost of holding crucial: funding payments can add up for as long as you keep the position. Also check which reference price is used for liquidation and whether only that position’s collateral is at risk or other available funds in your account as well.