A Perpetual Contract is a special type of futures contract. Unlike traditional futures, it has no fixed expiration date, allowing investors to hold positions indefinitely as long as their account margin is sufficient. Perpetual contracts are very popular in the cryptocurrency market, especially for traders who want to participate in long-term price movements.
1. Key Features
No Expiration Date
Perpetual contracts have no expiration, so investors do not need to worry about forced delivery or settlement and can hold positions long-term.
Funding Rate Mechanism
To keep the contract price close to the spot price, perpetual contracts periodically charge or pay a funding rate.
When the market is dominated by long positions, longs pay shorts; when shorts dominate, shorts pay longs.
Leverage Trading
Perpetual contracts support leverage, allowing investors to control larger positions with smaller margin, but potential risks must be noted.
2. Advantages
Flexible Positioning: Without an expiration date, investors can adjust positions according to market trends and follow the market long-term.
High Liquidity: Perpetual contracts are usually actively traded with many buyers and sellers, enabling quick opening and closing of positions.
Long/Short Strategies: Investors can go long (bullish) or short (bearish), flexibly responding to market conditions.
3. Risk Warnings
Leverage Risk: High leverage may cause rapid losses; investors should carefully manage positions.
Funding Rate Costs: Long-term positions may incur funding payments or receipts, affecting actual returns.
Price Volatility Risk: Cryptocurrency markets are highly volatile, with prices potentially rising or falling sharply in a short period.
4. Suitable Investors
Traders who want to participate in long-term market trends.
Experienced investors capable of managing leverage and risk.
Investors who want flexible long/short strategies to respond to market fluctuations.
Summary
Perpetual contracts are flexible, no-expiration futures derivatives suitable for investors following the market long-term. They maintain price stability through the funding rate mechanism while supporting leverage trading and long/short strategies. However, investors must fully understand the risks and carefully manage positions.