What are perpetual futures? A beginner's guide

Perpetual futures, often called perps, are derivative contracts without a scheduled expiry date. They let traders take long or short exposure to a reference asset or index without acquiring the underlying asset through that contract.

An open position still has ongoing requirements. It needs sufficient collateral, can incur funding payments, and may be liquidated. “No expiry” describes the contract schedule; it does not guarantee that a trader can keep a position open indefinitely.

The contract follows a price reference

A perpetual market identifies what its contract tracks and how profit or loss is settled. The reference might be Bitcoin, another asset, or a constructed index such as a basket of trading-card prices.

The index is a reference value. The price at which a trader can actually enter or exit comes from available market liquidity. Those prices can differ. A displayed reference of $100 does not mean someone is offering the desired quantity at $100.

Buying a contract from a flat account opens long exposure; selling opens short exposure. The contract defines the position's unit size, quote currency, and settlement calculation. Long vs short positions explains the direction of the resulting gains and losses.

How perpetuals differ from spot and dated futures

Spot purchases financed with borrowing can have margin requirements too. Conversely, trading a future does not automatically mean using the maximum permitted leverage. Contract type, custody, and leverage are separate questions.

For a fuller ownership comparison, read spot vs perpetual futures.

A complete opening-and-closing example

Assume a hypothetical quote-settled linear BTC perpetual is trading at $60,000. A trader buys 0.02 BTC of contract exposure, creating a $1,200 entry notional. With $400 of supporting equity in a simple one-position account, starting effective leverage is 3x.

If the trader sells the same quantity at $63,000 to close, price profit is 0.02 × ($63,000 − $60,000) = $60. If the closing price is $57,000, price loss is $60. Both calculations exclude fees and funding and assume the account maintained enough collateral until the exit.

Now suppose the profitable trade also incurred $2 in total trading fees and $3 in net funding payments. Net result is $60 − $2 − $3 = $55. The fee amounts are illustrative, not a venue's current schedule. The reference price alone cannot tell you this complete result.

A short in the same linear contract has the opposite gross price result over the same entry and exit prices. Inverse or differently margined contracts require their own calculation.

Why funding exists

Because a perpetual has no scheduled settlement date forcing convergence, many perpetual designs use funding to help keep the traded contract price near its reference. Funding transfers value between the long and short sides under the venue's formula.

A positive rate conventionally means longs pay shorts; a negative rate means shorts pay longs. The formula, sampling, interval, and exact payment rules belong to the particular market. The current sign is not a promise about the next payment.

Funding differs from an entry fee, and it can accumulate while a position remains open. It also does not guarantee that the contract always trades at the index. Our funding-rate guide provides a payment example and the platform's calculation details.

Collateral, leverage, and liquidation

Initial margin determines whether an account can open or increase exposure. Maintenance requirements determine whether its ongoing support is adequate. A loss, funding payment, collateral-price move, or other position can affect account health.

Liquidation can occur before the original collateral is exhausted. Adding collateral and reducing position size can both change leverage, but only reducing exposure lowers the dollar effect of an otherwise identical price move. Leverage in trading explains that distinction with 2x, 5x, and 10x examples.

A position also needs executable liquidity to close normally. A no-expiry contract can still face trading restrictions, outages, or changes to market terms. It should not be treated as a passive ownership substitute solely because it lacks a maturity date.

What to inspect on a perpetual market

• The underlying reference, contract size, quote currency, and settlement formula.
• Current collateral requirements and which account balances support the position.
• Funding calculation and timing, trading fees, and estimated execution costs.
• Order types, trigger-price references, and behavior after partial fills.
• Market eligibility, trading state, and restrictions on increasing or reducing exposure.

These details explain why two markets with the same asset name can behave differently. A BTC contract label identifies the general exposure, not every obligation involved in holding it.

Where perpetuals trade

Perpetuals are offered through centralized venues and onchain trading systems, including N1. Compare the actual contract and account rules before comparing interface features. The perp DEX guide focuses on how custody, execution, and settlement can differ between venues.

Sources

The perpetual market specification, funding documentation, and margin documentation support the product distinctions above. CME's margin introduction covers futures collateral terminology. Reviewed October 11, 2026; all numerical examples are hypothetical.