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Imagine you and a friend each bet on where a stock goes tomorrow. You think up, they think down. You do not need to buy any shares; you just settle the difference at the end. A perpetual future is that bet, except it is open to everyone, it never has to end, and you can size it with leverage. If the stock goes up 2%, your position goes up 2% times your leverage. If it goes down 2%, the same in reverse. A perpetual future (a “perp”) is a contract whose price follows an underlying asset: a stock, an index, a commodity, or a crypto asset. You never own the asset. You hold a position whose value rises and falls with it. Two things make perps different from traditional futures:
  • No expiry. You hold the position as long as you want, provided your margin holds up.
  • Leverage fee. An hourly payment between longs and shorts (called the funding rate elsewhere) keeps the contract price tied to the real price. See Leverage fee.

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Perps vs. buying the stock

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Perps vs. options

If you have ever wanted to bet on a stock going up or down with leverage, without learning the Greeks or worrying about expiry, perps are the simpler tool.

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How your PnL works

Your profit or loss moves one-to-one with the asset, multiplied by your leverage.
  • Long $1,000 of a stock at 10x (using $100 of margin). The stock rises 3%. Your position gains $30, a 30% return on your margin.
  • Same trade, the stock falls 3%. Your position loses $30. Fall 10% and your margin is gone; the position is liquidated before that.
See Liquidations for exactly how that limit works.

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Does the perp price match the real price?

Closely, but not always exactly. The perp price is set by buyers and sellers of the contract; the real price is set on the underlying market. The leverage fee pulls them together every hour. Gaps are usually a fraction of a percent and are largest during fast moves or when the underlying market is closed and the perp is still trading.

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Why trade perps

  • Leverage you control, from 1x to 50x, chosen per trade
  • Short as easily as you go long
  • Trade 24/7, including when the underlying exchange is closed
  • No expiry to manage
  • Isolated risk: the most you can lose is the margin on that position